REG - Alpha Real Tst Ltd - Annual Results for the year ended 31.3.22
10/06/2022 07:00
For best results when printing this announcement, please click on link below:
http://newsfile.refinitiv.com/getnewsfile/v1/story?guid=urn:newsml:reuters.com:20220610:nRSJ3980Oa&default-theme=true
RNS Number : 3980O Alpha Real Trust Limited 10 June 2022
LEI: 213800BMY95CP6CYXK69
10 June 2022
ALPHA REAL TRUST LIMITED ("ART" OR THE "COMPANY" OR "THE GROUP")
ART ANNOUNCES ITS ANNUAL RESULTS FOR THE YEAR ENDED 31 MARCH 2022
· NAV per ordinary share 216.0p as at 31 March 2022 (31 March 2021:
207.7p).
· Basic earnings for the year ended 31 March 2022 of 13.3p per
ordinary share (31 March 2021: earnings of 0.0p per ordinary share).
· Adjusted earnings for the year ended 31 March 2022 of 4.0p per
ordinary share (31 March 2021: 3.4p per ordinary share)*.
· Declaration of a quarterly dividend of 1.0p per ordinary share
expected to be paid on 20 July 2022.
· Robust financial position: ART has been adopting a cautious
approach to new investment and conserved cash as a result of the uncertainty
that characterised the past financial year; this has placed the Company in a
robust financial footing making it well positioned to take advantage of new
investment opportunities.
· Investment targets: the Company is currently focussed on
continuing to grow its loan portfolio whilst retaining scope to deliver
attractive risk adjusted returns including potential capital gains through its
wider real estate investment strategy.
· Diversified portfolio of secured senior and secured mezzanine
loan investments: as at 31 March 2022, the size of ART's drawn secured loan
portfolio was £36.4 million, representing 27.3% of the investment portfolio.
· The senior portfolio has an average Loan to Value ('LTV')** of
59.1% based on loan commitments (with mezzanine loans having an LTV range of
between 48.8% and 78.6% whilst the highest approved senior loan LTV is 72.9%).
· Loan commitments: including existing loans at the balance sheet
date and loans committed post period end, ART's current total committed but
undrawn loan commitments amount to £17.3 million.
· Sale of Cambourne Business Park: the sale of the business park,
in which ART held a 10% interest in the owning joint venture, completed in
December 2021 at a price in excess of the Company's latest book value; the
investment returned an IRR of in excess of 14.4% p.a. during ART's ownership.
· Galaxia, India: conclusion of litigation in relation to past
investment in India with the Supreme court permitting the release of funds to
ART and such funds being fully received post year end.
* The basis of the adjusted earnings per share is provided in note 9
** See below for more details
William Simpson, Chairman of Alpha Real Trust, commented:
"ART's investment portfolio benefits from diversification across geographies,
sectors and asset types. As inflationary pressures increasingly dominate the
economic backdrop in which the Company operates, ART remains on a robust
financial footing and is well placed to capitalise on new investment
opportunities.
ART remains committed to growing its diversified investment portfolio. In
recent years the Company focused on reducing exposure to direct development
risk and recycling capital into cashflow driven investments. The Company is
currently focussed on continuing to grow and diversify its loan portfolio and
also on its wider investment strategy which targets investments offering
inflation protection via index linked income adjustments and investments that
have potential for capital gains."
The Investment Manager of Alpha Real Trust is Alpha Real Capital LLP.
For further information please contact:
Alpha Real Trust Limited
William Simpson, Chairman, Alpha Real Trust +44 (0) 1481 742 742
Gordon Smith, Joint Fund Manager, Alpha Real Trust +44 (0) 207 391 4700
Brad Bauman, Joint Fund Manager, Alpha Real Trust +44 (0) 207 391 4700
Panmure Gordon, Broker to the Company
Atholl Tweedie +44 (0) 20 7886 2500
Notes to editors:
About Alpha Real Trust
Alpha Real Trust Limited targets investment, development, financing and other
opportunities in real estate, real estate operating companies and securities,
real estate services, infrastructure, infrastructure services, other
asset-backed businesses and related operations and services businesses that
offer attractive risk-adjusted total returns.
Further information on the Company can be found on the Company's website:
www.alpharealtrustlimited.com (http://www.alpharealtrustlimited.com) .
About Alpha Real Capital LLP
Alpha Real Capital is a value-adding international property fund management
group. Alpha Real Capital is the Investment Manager to ART. Brad Bauman and
Gordon Smith of Alpha Real Capital are joint Fund Managers to ART. Both have
experience in the real estate and finance industries throughout the UK, Europe
and Asia.
For more information on Alpha Real Capital please visit
www.alpharealcapital.com (http://www.alpharealcapital.com) .
Company's summary and objective
Strategy
ART targets investment, development, financing and other opportunities in real
estate, real estate operating companies and securities, real estate services,
infrastructure, infrastructure services, other asset-backed businesses and
related operations and services businesses that offer attractive risk-adjusted
total returns.
ART currently focusses on asset-backed lending, debt investments and high
return property investments in Western Europe that are capable of delivering
strong risk adjusted cash flows. The portfolio mix at 31 March 2022, excluding
sundry assets/liabilities, was as follows:
31 March 2022 31 March 2021
High return debt: 27.3% 26.1%
High return equity in property investments: 18.8% 19.5%
Other investments: 13.1% 0.5%
Cash: 40.8% 53.9%
The Company currently plans to invest the majority of its cash into secured
senior or secured mezzanine debt and grow its diversified loan portfolio
whilst retaining scope for further investments to deliver attractive risk
adjusted returns including potential capital gains through its wider
investment strategy.
Dividends
The current intention of the Directors is to pay a dividend and offer a scrip
dividend alternative quarterly to all shareholders.
Listing
The Company's shares are traded on the Specialist Fund Segment ("SFS") of the
London Stock Exchange ("LSE"), ticker ARTL: LSE.
Management
The Company's Investment Manager is Alpha Real Capital LLP ("ARC"), whose team
of investment and asset management professionals focus on the potential to
enhance earnings in addition to adding value to the underlying assets, and
also focus on the risk profile of each investment within the capital structure
to best deliver attractive risk adjusted returns.
The Company and the Investment Manager have extended the current management
agreement for a further term of five years from the expiry of the current term
on 21 December 2022. The Company believes this will provide the Company's
shareholders with greater certainty going forward on the continued access to
the management resources, and broader group support, of the Investment Manager
which will assist the Company to continue to achieve its investment
objectives. The annual management fee and performance fee arrangements remain
unchanged.
Control of the Company rests with the non-executive Guernsey based Board of
Directors.
Financial highlights
12 months ended 6 months ended 12 months ended
31 March 30 September 31 March
2022 2021 2021
Net asset value (£'000) 133,256 127,585 126,076
Net asset value per ordinary share 216.0p 208.5p 207.7p
Earnings per ordinary share (basic and diluted) (adjusted)* 4.0p 3.0p 3.4p
Earnings per ordinary share (basic and diluted) 13.3p 2.5p 0.0p
Dividend per ordinary share (paid during the period) 4.0p 2.0p 4.0p
* The adjusted earnings per share includes adjustments for the effect of the
fair value revaluation of investment property and indirect property
investments, capital element on Investment Manager's fees, the fair value
movements on financial assets and deferred tax provisions: full analysis is
provided in note 9 to the accounts.
Chairman's statement
I am pleased to present the Company's annual report and accounts for the year
ended 31 March 2022.
It has been an active year for ART that has involved both new investment,
principally focussed on the growth of the Company's portfolio of senior and
mezzanine loan investments and capital recycling via the sale of a UK business
park, which was completed at above book value. The recovery of the full award
from a longstanding litigation claim in India marks the successful conclusion
of legal proceedings.
ART's investment portfolio benefits from diversification across geographies,
sectors and asset types. As inflationary pressures increasingly dominate the
economic backdrop in which the Company operates, ART remains on a robust
financial footing and is well placed to capitalise on new investment
opportunities.
ART remains committed to growing its diversified investment portfolio. In
recent years the Company focused on reducing exposure to direct development
risk and recycling capital into cashflow driven investments. The Company is
currently focussed on continuing to grow and diversify its loan portfolio and
extending its wider investment strategy to target investments offering
inflation protection via index linked income adjustments and investments that
have potential for capital gains.
ART continues to adhere to its disciplined strategy and investment
underwriting principles which seek to manage risk through a combination of
operational controls, diversification and an analysis of the underlying asset
security.
Diversified secured lending investment
The Company has a diversified portfolio of secured senior and mezzanine loan
investments. The loans are typically secured on predominately residential real
estate investment and development assets with attractive risk adjusted income
returns. As at 31 March 2022, ART had committed £57.6 million across twenty
loans, of which £39.0 million (excluding a £2.6 million provision for
Expected Credit Loss discussed below) was drawn.
The Company's debt portfolio comprises predominately floating rate loans.
Borrowing rates are typically set at a margin over Bank of England Base Rates
and benefit from rising interest rates as outstanding loans deliver increasing
returns as loan rates track increases in the Bank Base Rate.
During the year, fourteen loans totalling £18.6 million (including accrued
interest and exit fees) were fully repaid and a further £4.5 million
(including accrued interest) was received as part repayments. Post year end,
two loans of £12.3 million were drawn and additional drawdowns of £1.8
million were made on existing loans, one loan was fully repaid for £3.3
million and part payments for other loans were received amounting to £3.4
million (including accrued interest).
As at 31 March 2022, 58.8% of the Company's loan investments were senior loans
and 41.2% were mezzanine loans. The portfolio has an average LTV of 60.4%
based on loan commitments (with mezzanine loans having an LTV range of between
48.8% and 78.6% whilst the highest approved senior loan LTV is 72.9%).
Portfolio loans are underwritten against value for investment loans or gross
development value for development loans as relevant and collectively referred
to as LTV in this report.
The largest individual loan in the portfolio as at 31 March 2022 is a senior
loan of £3.6 million which represents 6.3% of committed loan capital and 2.7%
of the Company's NAV. Two loans in the portfolio have entered receivership:
ART is closely working with stakeholders to maximise capital recovery. The
Company has considered the security on these loans (which are a combination of
a first charge and a second charge over the respective assets and personal
guarantees) and have calculated an Expected Credit Loss ('ECL') on these two
loans of approximately £2.2 million; the Group have also provided for an ECL
on the remainder of the loans' portfolio for an additional £0.4 million: in
total, the Group have provided for an ECL of £2.6 million in its consolidated
accounts.
Aside from the two cases of receivership, illustrated above, the Company's
loan portfolio has proved to be resilient despite the recent extended period
of heightened uncertainty and risk. In terms of debt servicing, allowing for
some temporary agreed extensions, interest and debt repayments have been
received in accordance with the loan agreements. Where it is considered
appropriate, on a case-by-case basis, underlying loan terms may be extended or
varied with a view to maximising ART's risk adjusted returns and collateral
security position. The Company's loan portfolio and new loan targets continue
to be closely reviewed to consider the potential impact on construction
timelines, building cost inflation and sales periods.
The underlying assets in the loan portfolio as at 31 March 2022 had geographic
diversification with a London and Southeast focus. The South of England
(including London) accounted for 56%, of which London accounted for 41%, of
the committed capital within the loan investment portfolio.
H2O, Madrid
ART has a 30% stake in a joint venture with CBRE Investment Management in the
H2O shopping centre in Madrid.
H2O occupancy, by area, as at 31 March 2022 was 90.7%. The centre trading
levels remain below the pre-covid highs, however a recovery is evident. In the
calendar year to 31 December 2021, visitor numbers were approximately 20%
below those of 2019 (pre-Covid), however visitor numbers for the period
January to March 2022 were 21% above the same period in 2021.
The residual impact of Covid-19 on tenant activities continues to affect the
earnings of H2O compared to pre-Covid levels. However, following almost two
years of intermittent restrictions impacting trading, tenants' sales are
showing signs of stabilisation and recovery, although this is not without
risk.
Sale of Cambourne Business Park
As previously announced, the sale of Cambourne Business Park, Cambridge,
completed in December 2021. ART received net proceeds of £2.1 million in
relation to the sale of its 10% equity interest in the owning joint venture.
The sale realised a return above the Company's book value for the investment.
Alpha Real Capital, the Company's Investment Manager has actively managed the
asset since acquisition in 2011 including achieving lease restructuring, new
lettings and refurbishment of buildings in the business park. The investment
has achieved an equity IRR of in excess of 14.4% p.a. for ART. Proceeds from
the sale are to be deployed in line with the Company's investment strategy.
Other investments
Galaxia, India
During February 2022, the Supreme Court of India issued an order concluding
the litigation regarding the Company's Galaxia investment, a 50:50 joint
venture with Logix Group ("Logix") in relation to an 11.2 acre development
site located in NOIDA, the National Capital Region, India.
As part of a prior court ruling, Logix were permitted to sell the Galaxia site
to raise capital for the award. The sale completed and the funds lodged by
the purchaser with the Supreme Court have been repatriated (post year end) to
ART's investment subsidiary in return for ART's subsidiary and Logix
relinquishing their title interests.
Reflecting the receipt of funds in April 2022 and allowing for provisioned
residual costs associated with the investment, the Company has increased the
carrying value of the joint venture in arbitration in its accounts as at 31
March 2022 to £5.9 million (INR 585 million) (31 March 2021: nil value).
Investment in listed and authorised funds
During the year, the Company invested a total of £11.0 million (value as at
31 March 2022: £11.0 million) across four investments that offer potential to
generate attractive risk adjusted returns. The returns offer a potentially
accretive return to holding cash while the Company deploys capital into
lending opportunities in line with its strategy of increasing its senior and
mezzanine loan portfolio. These funds invest in ungeared long-dated leased
real estate, debt and infrastructure.
Results and dividends
Results
Basic earnings for the year ended 31 March 2022 are £8.2 million (13.3 pence
per ordinary share, see note 9 of the financial statements).
Adjusted earnings, which the Board believes is a more appropriate assessment
of the operational income accruing to the Group's activities, for the year
ended 31 March 2022 are £2.5 million (4.0 pence per ordinary share, see note
9 of the financial statements). This compares with adjusted earnings per
ordinary share of 3.4 pence in the same period last year. While underlying
earnings increased significantly over the year following better performance at
the H2O shopping centre joint venture and revenue from new listed and
authorised funds' investments, these increases were mitigated to some extent
by the impact of increased ECL provisions against the loan portfolio.
The net asset value per ordinary share at 31 March 2022 is 216.0 pence per
share (31 March 2021: 207.7 pence per ordinary share) (see note 10 of the
financial statements). The increase over the year is primarily due to the
positive conclusion of the Galaxia investment litigation; while there were
fair value uplifts on H2O and Hamburg investments these were mitigated by
increased ECL provisions against the loan portfolio.
Dividends
The Board announces a dividend of 1.0 pence per ordinary share which is
expected to be paid on 20 July 2022 (ex-dividend date 23 June 2022 and record
date 24 June 2022).
The dividends paid and declared in respect of the year ended 31 March 2022
totalled 4.0 pence per ordinary share representing an annual dividend yield of
2.4% p.a. by reference to the average closing share price over the year ended
31 March 2022.
During the period, dividends of £451,600 were paid in cash and £1,992,050
settled by scrip issue of shares.
Scrip dividend alternative
Shareholders of the Company have the option to receive shares in the Company
in lieu of a cash dividend, at the absolute discretion of the Directors, from
time to time.
The number of ordinary shares that an Ordinary Shareholder will receive under
the Scrip Dividend Alternative will be calculated using the average of the
closing middle market quotations of an ordinary share for five consecutive
dealing days after the day on which the ordinary shares are first quoted "ex"
the relevant dividend.
The Board has elected to offer the scrip dividend alternative to Shareholders
for the dividend for the quarter ended 31 March 2022. Shareholders who
returned the Scrip Mandate Form and elected to receive the scrip dividend
alternative will receive shares in lieu of the next dividend. Shareholders who
have not previously elected to receive scrip may complete a Scrip Mandate Form
(this can be obtained from the registrar: contact Computershare (details
below)), which must be returned by 5 July 2022 to benefit from the scrip
dividend alternative for the next dividend.
Financing
As at 31 March 2022 the Group has one direct bank loan of €9.5 million
(£8.0 million), with no financial covenant tests, to an SPV used to finance
the acquisition of the Hamburg property. The loan is secured over the Hamburg
property and has no recourse to the other assets of the Group.
Further details of individual asset financing can be found under the
individual investment review sections later in this report.
Share buybacks
Under the general authority, approved by Shareholders on 6 August 2021,
Shareholders approved a resolution giving the Company a general authority to
buy back Ordinary Shares.
During the year, the Company purchased 207,645 shares in the market at the
average price of £1.64 per share: these shares are held in treasury.
Post year end, the Company purchased 46,500 shares in the market at the
average price of £1.51 per share: these shares are held in treasury.
As at the date of this announcement, the ordinary share capital of the Company
is 64,283,530 (including 2,298,565 ordinary shares held in treasury) and the
total voting rights in the Company are 61,984,965.
Foreign currency
The Company monitors foreign exchange exposures and considers hedging where
appropriate. Foreign currency balances have been translated at the period end
rates of £1:€1.185 or £1:INR99.678, as appropriate.
Brexit
On 30 December 2020, parliament accepted a post-Brexit trade deal agreed
between the UK and the EU. The transition period during which the UK has been
able to continue to access the Single Market and Customs Union ended at 11pm
on 31 December 2020.
There has been no significant disruption to the ART business caused by the
UK's exit from the EU and the completion of the free trade agreement. No
material adverse impacts have been noted within the Company's portfolio to
date and risks are mitigated by the Company's investments held in Europe.
However, the Board continues to monitor the situation for potential risks to
the Company's investments. The economic backdrop is highly dynamic, and the
spread of possible outcomes is wide. In this context, ART is well placed to
both weather market volatility and take advantage of any dislocation should it
arise.
Russian invasion of Ukraine, Covid-19 pandemic and going concern
The Company has assessed potential impacts on the ART's portfolio arising from
the Russian invasion of Ukraine. ART has no investments in Ukraine or Russia,
nor exposure to any companies that have investments in, or links to, Ukraine
or Russia. ART has no arrangements with any person currently on (or
potentially on) any sanctions list, or links to Ukraine or Russia. The
immediate economic impact of the invasion has been a sharp increase in the
price of oil and other energy based commodities. ART has no direct exposure to
these commodities. None of the borrowers or other counterparties in ART's loan
book have links to Ukraine or Russia. It is too early to measure any impact or
increased risk to the underlying values supporting ART's loan portfolio, but
we do not expect any material change to these values on account of the
conflict. The Board will continue to monitor the situation regularly, and will
consider the wider impact on the economy (such as potential further increases
in inflation and interest rates) and if there would be any potential material
impact on ART's portfolio.
The Company has not been isolated from the ubiquitous impact of the Covid-19
pandemic on global economies in the past year. The Company's long term
strategy remains resilient. The Company adopted a prudent short term strategy
to move to cash conservation and a cautious approach to commitments to new
investments during the financial year. Alert to the impact of potentially
reducing income returns, this approach supported a robust balance sheet
position during these uncertain times. Investment in new lending and growing
the Company's diversified loan portfolio has recommenced and remains a key
focus. As noted above, the Company held approximately 40.8% of its assets
(excluding sundry net assets) in cash as at 31 March 2022 with limited current
contractual capital commitments. While there is external financing in the
Group's investment interests, this is limited and non-recourse to the Company;
the borrowings in these special purpose vehicles are compliant with their
banking covenants. While the Board's dividend policy intention is unchanged
the Company continues to actively monitor its investments and the impact of
these unusual economic circumstances on earnings and dividends. See the
investment review section for more details on the pandemic's impact on
relevant investments.
Bearing in mind the nature of the Group's business and assets, after making
enquiries, with the support of revenue forecasts for the next twelve months
and considering the above, the Directors consider that the Group has adequate
resources to continue in operational existence for the foreseeable future. For
this reason, they continue to adopt the going concern basis in preparing the
financial statements.
Board changes
During the year, the Company announced the retirement of David Jeffreys
effective from 30 September 2021 and appointment of myself as Chairman of the
Board of Directors and Peter Griffin as Non-Executive Director also from 30
September 2021.
The Board and I wish to thank David Jeffreys for his service to the Company
since its inception in 2006.
Strategy and outlook
ART's investment portfolio benefits from diversification across geographies,
sectors and asset types. As inflationary pressures increasingly dominate the
economic backdrop in which the Company operates, ART remains on a robust
financial footing and is well placed to capitalise on new investment
opportunities.
ART remains committed to growing its diversified investment portfolio. In
recent years the Company focused on reducing exposure to direct development
risk and recycling capital into cashflow driven investments. The Company is
currently focussed on continuing to grow and diversify its loan portfolio and
also on its wider investment strategy which targets investments offering
inflation protection via index linked income adjustments and investments that
have potential for capital gains.
William Simpson
Chairman
9 June 2022
Investment review
Portfolio overview as at 31 March 2022
Investment name
Investment type Carrying value Income Investment location Property type / Investment notes % of portfolio(1) Notes*
return p.a. underlying security
High return debt (27.3%)
Secured senior finance
Senior secured loans (excluding committed but undrawn facilities of £18.6m) £21.4m (2) 7.7% (3) UK Diversified loan portfolio focussed on real estate investments and Senior secured debt 16.0% 16
developments
(during the period the average senior facilities commitments were
£18.0m)
Secured mezzanine finance
Second charge mezzanine loans £15.0m (2) 17.5% (3) UK Diversified loan portfolio focussed on real estate investments and Secured mezzanine debt and subordinated debt 11.3% 16
developments
(during the period the average mezzanine facilities commitments
were £15.0m)
High return equity in property investments (18.8%)
H2O shopping centre
Indirect property £17.1m 5.4% (4) Spain Dominant Madrid shopping centre and separate development site 30% shareholding; moderately geared bank finance facility 12.8% 12
(€20.2m)
Long leased industrial facility, Hamburg
Direct property £7.8m (5) 6.3% (4) Germany Long leased industrial complex in major European industrial and logistics hub Long term moderately geared bank finance facility 6.0% 13
(€9.2m)
Other investments (13.1%)
Listed and authorised fund investments
£11.0m 5.9%(4) UK & Channel Islands Commercial real estate, infrastructure and debt funds Short to medium term investment in listed and authorised funds 8.3% 15
Affordable housing Residential Investment
£0.6m n/a UK High-yield residential UK portfolio 100% shareholding; no external gearing 0.4% 13
Galaxia
Joint venture in arbitration £5.9m n/a India Development site located in NOIDA, Delhi, NCR Legal process to recover investment concluded 4.4% 14
(INR585m)
Cash and short-term investments (40.8%)
Cash and cash on escrow (6) £54.3m 0.1% (7) UK 'On call' and current accounts 40.8%
* See notes to the financial statements for more details
(1) Percentage share shown based on NAV excluding the company's sundry
assets/liabilities
(2) Including accrued interest/coupon at 31 March 2022
(3) The income returns for high return debt are the annualised actual finance
income return over the period shown as a percentage of the average committed
capital over the period
(4) Yield on equity over 12 months to 31 March 2022
(5) Property value including sundry assets/liabilities and cash, net of
associated debt
(6) Group cash of £55.0m excluding cash held with the Hamburg holding company
of £0.7m
(7) Weighted average annual interest earned
High return debt
Overview
ART has a portfolio of secured loan investments which contribute a diversified
return to the Company's earnings position. The portfolio comprises high return
senior (first charge) loans and mezzanine (second charge) loans secured on
real estate investment assets and developments. ART loan underwriting is
supported by the Investment Manager's asset-backed lending experience,
developer and investor relationships and knowledge of the underlying assets
and sectors, in addition to the Group's partnerships with specialist debt
providers.
Secured Finance
Investment Investment type Carrying value Income return p.a. Property type / underlying security Investment notes
Secured senior finance First charge secured loans £21.4m * 7.7%** Diversified loan portfolio focussed on real estate investments and Secured debt
developments
Secured mezzanine finance Second charge secured loans £15.0m * 17.5%** Diversified loan portfolio focussed on real estate investments and Second charge secured debt and secured subordinated debt
developments
* Including accrued interest/coupon at the balance sheet date
** The income returns for high return debt are the annualised actual
finance income return over the period shown as a percentage of the average
committed capital over the period
ART's portfolio of secured senior and mezzanine loan investments have
increased in scale and diversity over the past year. These loans are typically
secured on real estate investment and development assets with attractive
risk-adjusted income returns from either current or capitalised interest or
coupons.
As at 31 March 2022, ART had invested a total amount of £36.4 million across
twenty loans. Over the past twelve months the loan portfolio has increased by
11.1%.
During the year, fourteen loans totalling £18.6 million (including accrued
interest and exit fees) were fully repaid and a further £4.5 million
(including accrued interest) was received as part repayments. Post year end,
two loans of £12.3 million were drawn and additional drawdowns of £1.8
million were made on existing loans, one loan was fully repaid for £3.3
million and part payments for other loans were received amounting to £3.4
million (including accrued interest).
Each loan will typically have a term of up to two years (one loan has a term
of four years), a maximum 75% loan to gross development value ratio and be
targeted to generate attractive risk-adjusted income returns. As at 31 March
2022, the portfolio had an average LTV of 60.4% (with average approved LTV
between 48.8% and 78.6% for mezzanine facilities while the highest approved
LTV for senior loans is 72.9%).
Two loans in the portfolio have entered receivership: ART is closely working
with stakeholders to maximise their capital recovery. The Company has
considered the security on these loans (which are a combination of a first
charge over the assets and personal guarantees) and have calculated an
Expected Credit Loss ('ECL') on these two loans of approximately £2.2
million; the Group have also provided for an ECL on the remainder of the
loans' portfolio for an additional £0.4 million: in total, the Group have
provided for an ECL of £2.6 million in its consolidated accounts.
Current loan investment examples:
Location Total commitment Loan type Loan term Current LTV Underlying security
Fleet, Hampshire £1,704,000 Senior Development Loan 15 64.18% Development of nine new build apartments
St. Lawrence, Jersey £11,731,000 Senior Development Loan 24 63.00% Development of eleven new build apartments
Temple Fortune, London £8,600,000 Senior Development Loan 19 63.00% Development of eight new build houses
High return equity in property investments
Overview
ART continues to remain focused on investments that offer the potential to
deliver attractive risk-adjusted returns by way of value enhancement through
active asset management, improvement of income, selective deployment of
capital expenditure and the ability to undertake strategic sales when the
achievable price is accretive to returns.
H2O Shopping Centre, Madrid
Investment Investment type Carrying value Income return p.a. Property type / underlying security Investment notes
H2O Indirect property £17.1m 5.4%* High-yield, dominant Madrid shopping centre and separate development site 30% shareholding; 6-year term bank finance facility
(€20.2m)
* Yield on equity over twelve months to 31 March 2022
ART has a 30% stake in joint venture with CBRE Investment Management in the
H2O shopping centre in Madrid. H2O was opened in 2007 and built to a high
standard providing shopping, restaurants and leisure around a central theme of
landscaped gardens and an artificial lake. H2O has a gross lettable area of
approximately 52,425 square metres comprising 123 retail units. In addition to
a multiplex cinema, supermarket (let to leading Spanish supermarket operator
Mercadona) and restaurants, it has a large fashion retailer base, including
some of the strongest international fashion brands, such as Nike, Zara, Mango,
JD Sports, Cortefiel, H&M and C&A.
It continues to be a challenging period for shopping centre assets. Whilst
legislative restrictions on retailer trading hours and store capacities and
indoor mask requirements have largely been relaxed to allow for normalised
trading operations, the lingering social and economic impacts of Covid-19
continue to impact performance. This has resulted in supressed visitor numbers
and tenant sales performance being recorded for most shopping centre assets in
Spain and H2O is no exception.
The centre trading levels remain below the pre-covid highs however a recovery
is evident. In the calendar year to 31 December 2021, visitor numbers were
approximately 20% below those of 2019 (pre-Covid). Visitor numbers for the
period January to March 2022 were 21% above the same period in 2021.
The lingering economic effect of Covid-19 on the retail sector is expected to
continue to impact on the earnings of H2O for the financial year.
The asset management highlights are as follows:
· Valuation: 31 March 2022: €121.0 million (£102.1 million) (31
March 2021: €119.8 million (£101.9 million)).
· Centre occupancy: 90.7% by area as at 31 March 2022.
· Weighted average lease length to next break of 2.3 years and 7.6
years to expiry as at 31 March 2022.
Long leased industrial facility, Hamburg
Investment Investment type Carrying value Income return p.a. Property type / Investment notes
underlying security
Industrial facility, Werner-Siemens-Straße Hamburg, Germany Direct property £7.8m* 6.3%** High return industrial facility in Hamburg Germany Long leased investment with moderately geared, long term, bank finance
facility
(€9.2m)
* Property value including sundry assets/liabilities and cash, net of
associated debt
** Yield on equity over twelve months to 31 March 2022
ART has an investment of €9.2 million (£7.8 million) in an industrial
facility leased to a leading international group.
The property is held freehold and occupies a site of 11.8 acres in Billbrook,
a well-established and well-connected industrial area located approximately 8
kilometres south-east of Hamburg centre. Hamburg is one of the main industrial
and logistics markets in Germany.
The property is leased to Veolia Umweltservice Nord GmbH, part of the Veolia
group, an international industrial specialist in water, waste and energy
management, with a 23-year unexpired lease term. Under the operating lease,
the tenant is responsible for building maintenance and the rent has periodic
inflation linked adjustments.
The Hamburg asset is funded by way of a €9.5 million (£8.0 million)
non-recourse, fixed rate, bank debt facility which matures on 31 July 2028.
The facility carries no financial covenant tests.
This investment offers the potential to benefit from a long term secure and
predictable inflation-linked income stream which is forecast to generate
stable high single digit income returns. In addition, the investment offers
the potential for associated capital growth from an industrial location in a
major German logistics and infrastructure hub.
Other Investments
Listed and authorised fund investments
Investment Investment type Carrying value Income return p.a. * Property type / underlying security Investment notes
Commercial Long Income PAIF ('CLIP') Authorised fund £5.3m 6.1%** Open ended long income fund Long lease real estate fund
Sequoia Economic Infrastructure Income Fund Limited Listed equity £2.8m 5.6% Listed investment fund FTSE 250 infrastructure debt fund
GCP Infrastructure Investments Limited Listed equity £1.4m 6.7% Listed investment fund FTSE 250 infrastructure fund
GCP Asset Backed Income Fund Limited Listed equity £1.5m 6.0% Listed investment fund Diversified asset back debt fund
Total £11.0m 5.9%
*Yield on equity based on 12 months to 31 March 2022
**CLIP is a daily dealt authorised fund and ART's investment is an
accumulation share class. The return reported represents the total movement
in the shares during the period annualised.
During the year, the Company invested a total of £11.0 million (carrying
value as at 31 March 2022: £11.0 million) across four investments that offer
potential to generate attractive risk adjusted returns. The returns offer a
potentially accretive return to holding cash while the Company deploys capital
into lending opportunities in line with its strategy of increasing its senior
and mezzanine loan portfolio. These funds invest in ungeared long-dated real
estate, debt and infrastructure.
Affordable Housing
During the year, RealHousingCo Limited ("RHC") obtained successful
registration with the Regulator of Social Housing as a For Profit Registered
Provider of affordable homes. This status provides RHC with a platform to
undertake future investment in the affordable housing sector which offers
scope to generate long term, inflation-linked returns while addressing the
chronic undersupply of affordable homes in the UK.
RHC owns a residential property located in Liverpool (UK), which is comprised
of seven units, all of which are occupied by private individuals, each with a
six month term contract. The fair value of the Liverpool property as at 31
March 2022 was £0.6 million.
Galaxia, National Capital Region, NOIDA, India
During February 2022, the Supreme Court of India issued an order concluding
the litigation regarding the Company's Galaxia investment, a 50:50 joint
venture with Logix Group ("Logix") in relation to an 11.2 acre development
site located in NOIDA, the National Capital Region, India.
As part of a prior court ruling, Logix were permitted to sell the Galaxia site
to raise capital for the award. The sale completed and the funds lodged by
the purchaser with the Supreme Court have been repatriated (post year end) to
ART's investment subsidiary in return for ART's subsidiary and Logix
relinquishing their title interests.
Reflecting the receipt of funds in April 2022 and allowing for provisioned
residual costs associated with the investment, the Company has increased the
carrying value of the joint venture in arbitration in its accounts as at 31
March 2022 to £5.9 million (INR 585 million) (31 March 2021: nil value).
Cash balances
Investment Investment type Carrying value Income return p.a. Property type / underlying security Investment notes
Cash and cash on escrow balance * Cash £54.3m 0.1% ** 'On call' and current accounts n/a
* Group cash of £55.0m excluding cash held with the Hamburg holding
company of £0.7m
** weighted average interest earned on call accounts
As at 31 March 2022, the Group had cash balances (including cash on escrow) of
£54.3 million, excluding cash held with the Hamburg holding company of £0.7
million.
The Group's cash is held with established banks with strong credit ratings.
Summary
ART has a diversified portfolio focussed on asset-backed lending and property
investments in Western Europe.
The Company is currently focussed on continuing to grow its senior and
mezzanine loan portfolio whilst retaining scope to deliver attractive risk
adjusted cashflows and capital gains through its wider investment strategy.
Brad Bauman and Gordon Smith
For and on behalf of the Investment Manager
9 June 2022
Directors
William Simpson (aged 66)
Chairman
William Simpson has over 30 years' experience as a lawyer in financial
services. His focus has been on regulated and unregulated investment vehicles,
encompassing banking, finance, corporate, investment, trust and regulatory
work.
William studied law at Leeds University and practised at the Bar in England
before moving to the Cayman Islands and then the British Virgin Islands.
William was a partner at Ozannes, now Mourant, and then managing partner of
Ogier Guernsey, during which time he also served on the Ogier Group board.
In 2017 William became an independent consultant and remains a director of a
number of Guernsey based financial services companies. William is a member of
the English and Guernsey Bars.
Phillip Rose (aged 62)
Phillip Rose is a Fellow of the Securities Institute and holds a Master of Law
degree. He has over 40 years' experience in the real estate, funds
management and banking industries in Europe, the USA and Australasia. He has
been the Head of Real Estate for ABN AMRO Bank, Chief Operating Officer of
European shopping centre investor and developer TrizecHahn Europe, Managing
Director of retail and commercial property developer and investor Lend Lease
Global Investment and Executive Manager of listed fund General Property Trust.
Phillip is currently CEO of Alpha Real Capital LLP and has been a member of
the Management Committee for Hermes Property Unit Trust and its Audit
Committee, and has been a Non-Executive Director of Great Portland Estates
plc.
Jeff Chowdhry (aged 61)
Jeff is currently a Partner at RLC Ventures, an early stage, software focused,
VC fund.
He has an investment career which spans over 35 years having held senior
positions at F&C, as head of emerging markets and BMO Asset Management
where he was responsible for AUM of over $5 billion.
He is an active Angel investor having backed over 30 start-up companies and
has several board advisory positions within these rapidly growing businesses.
Melanie Torode (aged 42)
Mel Torode has 20 years' experience in the fund administration industry
specifically including private equity, property and mezzanine debt and is an
Independent Non-Executive Director.
Prior to founding Morgan Sharpe in April 2008 (a fund administration company
sold to Estera, subsequently Ocorian, in 2017), Mel was the Company Secretary
of Assura Administration, overseeing the administration of listed property
funds. During the period from 2017 to 2021, Mel held the roles of Operations
Director, Managing Director and subsequently Non-Executive of Ocorian
Guernsey.
Mel began her career at Guernsey International Fund Managers (now Northern
Trust), working on large private equity funds and European holding companies,
moving to Mourant International Finance Administration (now State Street)
where she spent more than two years concentrating primarily on listed property
funds.
Peter Griffin (aged 63)
Peter Griffin has over 30 years' experience in financial services and is a
qualified chartered accountant.
He is currently a director of three investment companies listed on The
International Stock Exchange: Handelsbanken Alternatives Fund Limited, The
London Central Portfolio Property Fund Limited and The London Central
Residential Recovery Fund Limited.
Peter previously had various senior roles in the trust services industry in
the Channel Islands and Isle of Man.
Directors' and Corporate Governance report
The Directors present their report and financial statements of the Group for
the year ended 31 March 2022.
Principal activities and status
During the year, the Company, an authorised closed-ended Guernsey registered
investment company, carried on business as an investment company, investing in
direct property, development, financing and other opportunities in real
estate, real estate operating companies and securities, real estate services,
infrastructure, infrastructure services, other asset-backed businesses and
related operations and services businesses.
The Company's shares are traded on the Specialist Fund Segment ("SFS") of the
London Stock Exchange ("LSE").
Business review, results and dividend
A review of the business during the year is contained in the Chairman's
Statement above.
The results for the year to 31 March 2022 are set out in the financial
statements. On 25 February 2022, the Company declared a dividend of 1.0p per
share, which was paid to shareholders on 6 April 2022. The intention of the
Company is to pay a dividend quarterly.
Share buybacks
Under the general authority, approved by Shareholders on 6 August 2021,
Shareholders approved a resolution giving the Company a general authority to
buy back Ordinary Shares.
During the year, the Company purchased 207,645 shares in the market at the
average price of £1.64 per share: these shares are held in treasury. Post
year end, the Company purchased 46,500 shares in the market at the average
price of £1.51 per share: these shares are held in treasury. As at the date
of this announcement, the ordinary share capital of the Company is 64,283,530
(including 2,298,565 ordinary shares held in treasury) and the total voting
rights in the Company are 61,984,965.
Scrip dividend alternative
In the circular published on 18 December 2018, the Company sought
shareholders' approval to enable a scrip dividend alternative to be offered to
ordinary shareholders whereby they could elect to receive additional ordinary
shares in lieu of a cash dividend, at the absolute discretion of the
Directors, from time to time. This was approved by shareholders at the
extraordinary general meeting on 8 January 2019.
The number of ordinary shares that an ordinary shareholder will receive under
the scrip dividend alternative will be calculated using the average of the
closing middle market quotations of an ordinary share for five consecutive
dealing days after the day on which the ordinary shares are first quoted "ex"
the relevant dividend.
The Board elected to offer the scrip dividend alternative to shareholders for
the dividend for the quarter ended 31 December 2021: for this period, scrip
dividend alternative elections were received in respect of 49,150,434 shares
of the Company, which has resulted in the issue of 346,379 new ordinary shares
in April 2022.
Further details on dividends are given in note 8 of the financial statements.
Corporate governance
As a Guernsey registered company traded on SFS, the Company is not required to
comply with the UK Corporate Governance Code ("UK Code"). However, as a
company authorised by the Guernsey Financial Services Commission ("GFSC"), it
is required to follow the principles and guidance set out in the Finance
Sector Code of Corporate Governance issued by the GFSC and effective from 1
January 2012 (amended in February 2016 and November 2021) ("Guernsey Code").
Compliance with the Guernsey Code and general principles of good corporate
governance are reviewed by the Board at least annually and, at the date of
signing these financial statements, the Board is satisfied that the Company is
fully compliant with the Guernsey Code. The Guernsey Code is available for
consultation on the GFSC website: www.gfsc.gg (http://www.gfsc.gg) .
The Board
Biographies of the Directors are set out above.
The Directors' interests in the shares of the Company as at 31 March 2022 are
set out below:
Number of ordinary shares Number of ordinary shares
31 March 2022 31 March 2021
Phillip Rose 953,872 933,867
Jeff Chowdhry 5,000 5,000
Melanie Torode - -
William Simpson 18,000 18,000
Peter Griffin* - -
* appointed on 30 September 2021
Post year end, Phillip Rose increased his shareholding in ART to 959,854
ordinary shares.
Non-executive directors are not appointed for specified terms; appointments of
Board members can be terminated at any time without penalty and the Company's
Articles of Association ("Articles") require each Director to retire and
submit himself/herself to re-election by the shareholders at every third
year. In addition, the Board believes that continuity and experience add to
its strength.
The Annual General Meeting of the Company will take place on 8 September
2022. At this meeting, William Simpson and Peter Griffin will retire and
submit themselves for re-election. The remainder of the Board recommend their
re-appointment.
Individual Directors may seek independent legal advice in relation to their
duties on behalf of the Company.
Operations of the Board
The Board has determined that its role is to consider and determine the
following principal matters which it considers are of strategic importance to
the Company:
1) Review the overall objectives for the Company and set the Company's
strategy for fulfilling those objectives within an appropriate risk framework
2) Consider any shifts in strategy that it considers may be appropriate
in light of market conditions
3) Review the capital structure of the Company including consideration
of any appropriate use of gearing both for the Company and in any joint
ventures in which the Company may invest from time to time
4) Appoint the Investment Manager, Administrator and other appropriately
skilled service providers and monitor their effectiveness through regular
reports and meetings
5) Review key elements of the Company's performance including Net Asset
Value and payment of dividends.
At Board meetings, the Board ensures that all the strategic matters are
considered and resolved by the Board. Certain issues associated with
implementing the Company's strategy are delegated either to the Investment
Manager or the Administrator. Such delegation is over minor incidental matters
and the Board continually monitors the services provided by these independent
agents. The Board considers matters that are significant enough to be of
strategic importance and are therefore reserved solely for the Board (e.g. all
acquisitions, all disposals, significant capital expenditure, leasing and
decisions affecting the Company's financial gearing).
The Board meets at least quarterly and as required from time to time to
consider specific issues reserved for decision by the Board, as noted above.
At the Board's quarterly meetings, it considers papers circulated in advance
including reports provided by the Investment Manager and the Administrator.
The Investment Manager's report comments on:
· The property and debt markets of the UK and Europe
including recommendations for any changes in strategy that the Investment
Manager considers may be appropriate
· Performance of the Group's portfolio and key asset
management initiatives
· Transactional or lending activity undertaken over the
previous quarter and being contemplated for the future
· The Group's financial position including relationships
with bankers, borrowers and lenders.
These reports enable the Board to assess the success with which the Group's
investment strategy and other associated matters are being implemented and
also consider any relevant risks and to consider how they should be properly
managed.
The Company's service providers issue reports on their own internal controls
and these reports are considered by the Board periodically.
In between its regular quarterly meetings, the Board has also met on a number
of occasions during the year to approve specific transactions and for other
matters.
Board and Directors' appraisals
The Board carries out an annual review of its composition and performance
(including the performance of individual Directors) and that of its standing
committees. Such appraisal includes reviewing the performance and
composition of the Board (and whether it has an appropriate mix of knowledge,
skills and experience), the relationships between the Board and the Investment
Manager and Administrator, the processes in place and the information provided
to the Board and communication between Board members.
Board Meeting attendance
The table below shows the attendance at Board meetings during the year to 31
March 2022:
No of meetings attended
David Jeffreys* 6
Phillip Rose 2
Jeff Chowdhry 4
Melanie Torode 13
William Simpson 13
Peter Griffin** 6
No. of meetings during the year 14
* retired on 30 September 2021
** appointed on 30 September 2021
Directors' and officers' insurance
An appropriate level of Directors' and officers' insurance is maintained
whereby Directors are indemnified against liabilities to third parties to the
extent permitted by Guernsey company law.
Board Committees
The Board has established three standing committees, all of which operate
under detailed terms of reference, copies of which are available on request
from the Company Secretary.
Audit and Risk Committee
The Audit and Risk Committee consists of Peter Griffin (Chairman), Jeff
Chowdhry and William Simpson. The Board is satisfied that Peter Griffin
continues to have the requisite recent and relevant financial experience to
fulfil his role as Chairman of the Audit and Risk Committee.
Role of the Committee
The role of the Audit and Risk Committee, which meets at least twice a year,
includes:
· The engagement, review of the work carried out by and the
performance of the Group's external auditor
· To monitor and review the independence, objectivity and
effectiveness of the external auditor
· To develop and apply a policy for the engagement of the external
audit firm to provide non-audit services
· To assist the Board in discharging its duty to ensure that
financial statements comply with all legal requirements
· To review the Group's financial reporting and internal control
policies and to ensure that the procedures for the identification, assessment
and reporting of risks are adequate
· To review regularly the need for an internal audit function
· To monitor the integrity of the Group's financial statements,
including its annual and half-year reports and announcements relating to its
financial performance, reviewing the significant financial reporting issues
and judgements which they contain
· To review the consistency of accounting policies and practices
· To review and challenge where necessary the financial results of
the Group before submission to the Board.
The Audit and Risk Committee makes recommendations to the Board which are
within its terms of reference and considers any other matters as the Board may
from time to time refer to it.
Members of the Audit and Risk Committee may also, from time to time, meet with
the Group's independent property valuers to discuss the scope and conclusions
of their work.
Committee meeting attendance
No of meetings attended
David Jeffreys* 1
William Simpson 3
Jeff Chowdhry 2
Peter Griffin** 2
No. of meetings during the year 3
* retired on 30 September 2021
** appointed on 30 September 2021
Policy for non audit services
The Committee has adopted a policy for the provision of non-audit services by
the Company's external auditor, BDO Limited, and reviews and approves all
material non-audit related services in accordance with the need to ensure the
independence and objectivity of the external auditor. No services, other than
audit-related ones, were carried out by BDO Limited during the year.
Internal audit
The Board relies upon the systems and procedures employed by the Investment
Manager and the Administrator which are regularly reviewed and are considered
to be sufficient to provide it with the required degree of comfort. Therefore,
the Board continues to believe that there is no need for an internal audit
function, although the Audit and Risk Committee considers this annually,
reporting its findings to the Board.
Nomination Committee and attendance
The Nomination Committee consists of William Simpson (Chairman), Phillip Rose
and Melanie Torode.
The Committee's principal task is to review the structure, size and
composition of the Board in relation to its size and position in the market
and to make recommendations to fill Board vacancies as they arise and it meets
at least annually. It met twice during the year and all Committee members
were present.
Remuneration Committee and attendance
The Remuneration Committee consists of Melanie Torode (Chairman), Jeff
Chowdhry and William Simpson.
The Board has approved formal terms of reference for the Committee and a copy
of these is available on request from the Company Secretary.
As the Company comprises only non-executive directors, the Committee's main
role is to determine their remuneration within the cap set out in the
Company's Articles. It met once during the year and all Committee members
were present.
Remuneration report
The aggregate fees payable to the Directors are limited to £200,000 per annum
under the Company's Articles. The annual fees payable to each Director, which
were last reviewed in 2019, have been increased by 10% with effect from 1
April 2022. The fees payable to the Directors are expected to reflect their
expertise, responsibilities and time spent on the business of the Group,
taking into account market equivalents, the activities, the size of the Group
and market conditions. Under their respective appointment letters, each
Director is entitled to an annual fee together with a provision for
reimbursement for any reasonable out of pocket expenses.
During the year the Directors received the following emoluments in the form of
fees from Group companies:
Year ended Year ended
31 March 2022 31 March 2021
£ £
David Jeffreys* 18,000 36,000
Phillip Rose 25,000 25,000
Jeff Chowdhry 25,000 25,000
William Simpson 25,000 25,000
Peter Griffin** 12,500 -
Melanie Torode*** 55,476 62,335
Total 160,976 173,335
* retired on 30 September 2021
** appointed on 30 September 2021
*** This comprises £25,000 for the ART's directorship plus fees for
directorships of ART's subsidiaries and joint ventures
Internal control and risk management
The Board understands its responsibility for ensuring that there are
sufficient, appropriate and effective systems, procedures, policies and
processes for internal control of financial, operational, compliance and risk
management matters in place in order to manage the risks which are an inherent
part of business. Such risks are managed rather than eliminated in order to
permit the Company to meet its financial and other objectives.
The Board reviews the internal procedures of both its Investment Manager and
its Administrator upon which it is reliant. The Investment Manager has a
schedule of matters which have been delegated to it by the Board and upon
which it reports to the Board on a quarterly basis. These matters include
quarterly management accounts and reporting both against key financial
performance indicators and its peer group. Further, a compliance report is
produced by the Administrator for the Board on a quarterly basis.
The Company maintains a risk management framework which considers the
non-financial as well as financial risks and this is reviewed by the Audit and
Risk Committee prior to submission to the Board.
Investment management agreement
The Company has an agreement with the Investment Manager. This sets out the
Investment Manager's key responsibilities, which include proposing a property
investment strategy to the Board, identifying property investments to
recommend for acquisition and arranging appropriate lending facilities.
The Investment Manager is also responsible to the Board for all issues
relating to property asset management.
Substantial shareholding
Shareholders with holdings of more than 3 per cent of the voting rights of
the Company as at 26 May 2022 were as follows:
Name of investor Number of % held
voting rights
Alpha Global Property Securities Fund Pte. Ltd 24,332,844 39.25%
Rockmount Ventures Ltd 23,768,517 38.34%
Miton Global Opportunities 2,575,000 4.15%
Shareholder relations
The Board places high importance on its relationship with its shareholders,
with members of the Investment Manager's Investment Committee making
themselves available for meetings with key shareholders and sector analysts.
Reporting of these meetings and market commentary is received by the Board on
a quarterly basis to ensure that shareholder communication fulfils the needs
of being useful, timely and effective. One or more members of the Board and
the Investment Manager will be available at the Annual General Meeting to
answer any questions that shareholders attending may wish to raise.
Directors' Responsibilities Statement
The Directors are responsible for preparing the annual report and the
financial statements in accordance with the applicable law and regulations.
Company law requires the Directors to prepare financial statements for each
financial year, which give a true and fair view of the state of affairs of the
Group at the end of the year and of the profit or loss of the Group for that
year.
In preparing those financial statements, the Directors are required to:
1) select suitable accounting policies and then apply
them consistently;
2) make judgements and estimates that are reasonable and prudent;
3) state whether applicable accounting standards have been followed,
subject to any material departures disclosed and explained in the financial
statements; and
4) prepare the financial statements on the going concern basis unless it
is appropriate to assume that the Group will not continue in business.
So far as each of the Directors is aware, there is no relevant information of
which the Group's auditor is unaware, and they have taken all the steps they
ought to have taken as Directors to make themselves aware of any relevant
information and to establish that the Group's auditor is aware of that
information.
The Directors are responsible for keeping proper accounting records which
disclose with reasonable accuracy at any time the financial position of the
Group and which enable them to ensure that the financial statements comply
with the Companies (Guernsey) Law, 2008. They are also responsible for
safeguarding the assets of the Group and hence for taking reasonable steps for
the prevention and detection of fraud and other irregularities.
The Directors confirm that they have complied with the above requirements in
preparing the financial statements.
Principal risks and uncertainties
The principal risks and uncertainties facing the Group can be outlined as
follows:
· Rental income, fair value of investment properties (directly or
indirectly held) and fair value of the Group's equity investments are
affected, together with other factors, by general economic conditions and/or
by the political and economic climate of the jurisdictions in which the
Group's investments and investment properties are located.
· The Group's loan investments are exposed to credit risk which
arise by the potential failure of the Group's counter parties to discharge
their obligations when falling due; this could reduce the amount of future
cash inflows from financial assets on hand at the balance sheet date; the
Group receives regular updates from the relevant investment manager as to the
performance of the underlying investments and assesses their credit risk as a
result.
· The Russian invasion of Ukraine is also considered to be a
significant risk and uncertainty for the Group: this is discussed on the first
paragraph of the below going concern section.
Russian invasion of Ukraine, Covid-19 pandemic and going concern
The Company has assessed potential impacts on the ART's portfolio arising from
the Russian invasion of Ukraine. ART has no investments in Ukraine or Russia,
nor exposure to any companies that have investments in, or links to, Ukraine
or Russia. ART has no arrangements with any person currently on (or
potentially on) any sanctions list, or links to Ukraine or Russia. The
immediate economic impact of the invasion has been a sharp increase in the
price of oil and other energy based commodities. ART has no direct exposure to
these commodities. None of the borrowers or other counterparties in ART's loan
book have links to Ukraine or Russia. It is too early to measure any impact or
increased risk to the underlying values supporting ART's loan portfolio, but
we do not expect any material change to these values on account of the
conflict. The Board will continue to monitor the situation regularly, and will
consider the wider impact on the economy (such as potential further increases
in inflation and interest rates) and if there would be any potential material
impact on ART's portfolio.
The Company has not been isolated from the ubiquitous impact of the Covid-19
pandemic on global economies in the past year. The Company's long term
strategy remains resilient. The Company adopted a prudent short term strategy
to move to cash conservation and a cautious approach to commitments to new
investments during the financial year. Alert to the impact of potentially
reducing income returns, this approach supported a robust balance sheet
position during these uncertain times. Investment in new lending and growing
the Company's diversified loan portfolio has recommenced and remains a key
focus. As noted above, the Company held approximately 40.8% of its assets
(excluding sundry net assets) in cash as at 31 March 2022 with limited current
contractual capital commitments. While there is external financing in the
Group's investment interests, this is limited and non-recourse to the Company;
the borrowings in these special purpose vehicles are compliant with their
banking covenants. While the Board's dividend policy intention is unchanged
the Company continues to actively monitor its investments and the impact of
these unusual economic circumstances on earnings and dividends. See the
investment review section for more details on the pandemic's impact on
relevant investments.
Bearing in mind the nature of the Group's business and assets, after making
enquiries, with the support of revenue forecasts for the next twelve months
and considering the above, the Directors consider that the Group has adequate
resources to continue in operational existence for the foreseeable future. For
this reason, they continue to adopt the going concern basis in preparing the
financial statements.
Annual General Meeting
The AGM of the Company will be held in Guernsey at 9.00 am on 8 September 2022
at Floor 2, Trafalgar Court, Les Banques, St Peter Port, Guernsey. The
meeting will be held to receive the Annual Report and Financial Statements,
re-elect Directors and propose the reappointment of the auditor and that the
Directors be authorised to determine the auditor's remuneration.
Independent Auditor
BDO Limited has expressed its willingness to continue in office as auditor.
By order of the Board,
William
Simpson
Peter Griffin
Director
Director
9 June 2022
Directors' statement pursuant to the Disclosure Guidance and Transparency
Rules
Each of the Directors, whose names and functions are listed in the Directors'
and corporate governance report confirm that, to the best of each person's
knowledge and belief:
· The financial statements, prepared in accordance with IFRSs as
adopted by the EU, give a true and fair view of the assets, liabilities,
financial position and profit of the Group, and
· The Chairman's statement and the investment review include a fair
review of the development and performance of the business and the position of
the Group and provide a description of the principal risks and uncertainties
that the Group faces.
By order of the Board,
William
Simpson
Peter Griffin
Director
Director
9 June 2022
Independent Auditor's Report
To the Members of Alpha Real Trust Limited
Opinion on the financial statements
In our opinion, the financial statements of Alpha Real Trust Limited (the
"Parent Company") and its subsidiaries (the "Group"):
· give a true and fair view of the state of the Group's affairs as
at 31 March 2022 and of its profit for the year then ended;
· have been properly prepared in accordance with International
Financial Reporting Standards ("IFRS") as adopted by the European Union; and
· have been properly prepared in accordance with the requirements
of the Companies (Guernsey) Law, 2008.
We have audited the financial statements of the Group for the year ended 31
March 2022 which comprise the Consolidated Statement of Comprehensive Income,
the Consolidated Balance Sheet, the Consolidated Cash Flow Statement, the
Consolidated Statement of Changes in Equity and notes to the financial
statements, including a summary of significant accounting policies.
The financial reporting framework that has been applied in their preparation
is applicable law and IFRS as adopted by the European Union.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing
(UK) (ISAs
(UK)) and applicable law. Our responsibilities under those standards are
further described in the Auditor's responsibilities for the audit of the
financial statements section of our report. We believe that the audit evidence
we have obtained is sufficient and appropriate to provide a basis for our
opinion. Our audit opinion is consistent with the additional report to the
audit committee.
Independence
We remain independent of the Group and the Parent Company in accordance with
the ethical requirements that are relevant to our audit of the financial
statements in the UK, including the FRC's Ethical Standard as applied to
listed entities, and we have fulfilled our other ethical responsibilities in
accordance with these requirements.
Conclusions relating to going concern
In auditing the financial statements, we have concluded that the Directors'
use of the going concern basis of accounting in the preparation of the
financial statements is appropriate. Our evaluation of the Directors'
assessment of the Group's ability to continue to adopt the going concern basis
of accounting included:
· Obtaining those charged with governance and directors'
assessment in respect of going concern and challenging this, based on our
knowledge of the Group, with both those charged with
governance and management.
· Consideration of the cash available together with the expected
annual running expenses of the Group and determining whether these
assumptions were reasonable based on our knowledge of the Group.
· Reviewing the minutes of meetings of those charged with
governance, the RNS announcements and the compliance reports for indication
of any events or conditions which may impact on going concern.
Based on the work we have performed, we have not identified any material
uncertainties relating to events or conditions that, individually or
collectively, may cast significant doubt on the Group's ability to continue as
a going concern for a period of at least twelve months from when the financial
statements are authorised for issue.
Our responsibilities and the responsibilities of the Directors with respect to
going concern are described in the relevant sections of this report.
Independent Auditor's Report (continued)
Overview
Property valuations
Key audit matters (2022 and 2021)
Loans advanced and IFRS 'Financial Statements'
Materiality Group financial statements as a whole
£2,135,000 (2021:£2,023,000) based on 1.5% (2021: 1.5%)
of total assets
Materiality
Group financial statements as a whole
£2,135,000 (2021:£2,023,000) based on 1.5% (2021: 1.5%)
of total assets
An overview of the scope of our audit
Our Group audit was scoped by obtaining an understanding of the Group and its
environment, including the Group's system of internal control, and assessing
the risks of material misstatement in the financial statements. We also
addressed the risk of management override of internal controls, including
assessing whether there was evidence of bias by the Directors that may have
represented a risk of material misstatement.
We tailored the scope of our audit taking into account the nature of the
Group's investments, involvement of the Investment Manager, the accounting and
reporting environment and the industry in which the Group operates.
The Group consists of the Parent Company, numerous subsidiaries and two joint
venture entities. We concluded that the most effective audit approach to the
Group, with the exception of the joint venture structures, was to audit the
consolidated financial statements as if they were one entity, during which we
have performed audit procedures on all key risk areas. The materiality applied
was based on the consolidated financial information (see Materiality section
below).
For the H2O joint venture entity, we assessed the main property holding
company within this structure to be a significant component. This component
was subject to a full scope audit and was completed by a component auditor who
is part of the BDO Network.
For the remaining joint venture entity we concluded that it was significant
due to risks identified only and not due to size. This component was not
subject to a full scope audit but instead the group engagement team performed
audit procedures over all of the risk areas identified.
Our involvement with component auditors
For the work performed by the component auditor, we determined the level of
involvement needed in order to be able to conclude whether sufficient
appropriate audit evidence has been obtained as a basis for our opinion on the
Group financial statements as a whole. Our involvement with component auditor
included the following:
We issued group instructions to the component auditor of the H20 Joint venture
and reviewed the key risk areas of their work. In addition to the work
performed by the component auditor, we have also performed our own audit
procedures on the property valuation.
Key audit matters
Key audit matters are those matters that, in our professional judgement, were
of most significance in our audit of the financial statements of the current
period and include the most significant assessed risks of material
misstatement (whether or not due to fraud) that we identified, including those
which had the greatest effect on: the overall audit strategy, the allocation
of resources in the audit, and directing the efforts of the engagement team.
These matters were addressed in the context of our audit of the financial
statements as a whole, and in forming our opinion thereon, and we do not
provide a separate opinion on these matters.
Independent Auditor's Report (continued)
Key Audit Matter How the scope of our audit addressed the key audit matter
Property valuations (notes 2(b), 12, 13 and 26) Independent valuations
The Group holds several investment properties within its subsidiaries and For all independent property valuations, we evaluated the competence of the
joint venture structures. external valuers, which included consideration of their qualifications and
expertise. We discuss their terms of engagement with the valuers to determine
whether there were any matters that might have affected their objectivity or
may have imposed scope limitations upon their work.
The directors have valued all properties based on independent RICS valuations
performed by independent valuers.
We read the valuation reports for the properties and discussed the basis of
the property valuations with the valuers to understand the process undertaken
Such property valuations are a highly subjective area as the valuers will make by them and confirmed that the valuations were prepared in accordance with
judgements as to property yields, quality of tenants, development costs and professional valuation standards and IFRS.
other variables to arrive at the current open market value of the property.
We have considered the reasonableness, and where appropriate agreed through to
Any input inaccuracies or unreasonable bases used in the valuation judgements supporting documentation (for example rental income) of the inputs used by the
(such as in respect of estimated rental value and yield profile applied) could valuers in the valuations, such as the terms of void periods, rent free
result in a material misstatement of the Consolidated Statement of periods and other assumptions that impact the value.
Comprehensive Income and the Consolidated Balance Sheet, and we therefore
determined this to be a key audit matter.
Key observations
Based on the procedures performed, we consider that the judgements made in the
property valuations are reasonable.
Independent Auditor's Report (continued)
Loans advanced and IFRS 9 'Financial Instruments' (note 2(b) and 16)
The Group's activities include advancing senior loans and mezzanine loans
secured over real estate assets. The amounts advanced represent a material
balance in the financial statements and IFRS 9 requires losses to be Through challenge, discussion and review of example scenarios, we gained a
recognised on an expected, forward-looking basis, reflecting the Group's view detailed understanding of, and evaluated, the expected credit loss methodology
of potential future economic events. applied by management. This was undertaken with reference to accounting
standards and industry practice.
As a result, the Group's IFRS 9 methodology incorporates a number of estimates
to determine the expected credit loss provisions, and we therefore considered We then tested the methodology used in determining the amortised cost amount
this to be a key audit matter. and recognition of any impairment loss. Our testing included:
· reviewing the methodology, including key assumptions and
parameters, to check it is in line with IFRS 9 and appropriate, given our
understanding of the loans advanced;
· obtaining and reviewing all loan agreements to confirm the
appropriateness of all loans except 1 being classified as stage 3 due to the
repayable on demand feature.
· obtaining and challenging, through discussion, the updates made
to the existing methodology to appropriately reflect the changes in the
economy.
· obtaining underlying supporting documentation, on a sample basis,
we tested the inputs that drive the economic scenario applied to the loans.
· undertaking procedures to check that the ECL model applied by
management was mathematically accurate;
· challenging management's expected credit loss on two individual
loans which had entered into true default and the manual adjustments made over
the mechanical model.
Key observations
Based on the procedures performed, consider the estimates used in the
determination of the expected credit losses were reasonable.
Independent Auditor's Report (continued)
Our application of materiality
We apply the concept of materiality both in planning and performing our audit,
and in evaluating the effect of misstatements. We consider materiality to be
the magnitude by which misstatements, including omissions, could influence the
economic decisions of reasonable users that are taken on the basis of the
financial statements.
In order to reduce to an appropriately low level the probability that any
misstatements exceed materiality, we use a lower materiality level,
performance materiality, to determine the extent of testing needed.
Importantly, misstatements below these levels will not necessarily be
evaluated as immaterial as we also take account of the nature of identified
misstatements, and the particular circumstances of their occurrence, when
evaluating their effect on the financial statements as a whole.
Based on our professional judgement, we determined materiality for the
financial statements as a whole and performance materiality as follows:
Group financial statements
2022 2021
Materiality £2,135,000 £2,023,000
Basis for determining materiality 1.5% of total assets
Rationale for the benchmark applied Due to it being an investment fund with the objective of long-term capital
growth with investment values being a key focus of users of the financial
statements.
Performance materiality £1,601,000 £1,517,000
Basis for determining performance materiality 75% of materiality
This was determined using our professional judgement and took into account the
complexity of the group and our long-standing knowledge of the engagement
together with a history of minimal errors and adjustments.
Specific materiality
We also determined that for sensitive fees including: management fees,
performance fees, legal fees, directors' fees and audit fees, a misstatement
of less than materiality for the financial statements as a whole, specific
materiality, could influence the economic decisions of users. As a result, we
determined materiality for these items based on 10% (2021: 10%) of materiality
being £213,000 (2021: £203,000). We further applied a performance
materiality level of 75% (2021: 75%) of specific materiality to ensure that
the risk of errors exceeding specific materiality was appropriately mitigated.
Component materiality
We set materiality for the significant component of the Group based on a
percentage of 90% (2021: 90%) of Group materiality dependent on the size and
our assessment of the risk of material misstatement of that component.
Component materiality was set at £1,921,500 (2021: £1,822,050) . In the
audit of each component, we further applied performance materiality levels of
75% (2021: 75%) of the component materiality to our testing to ensure that the
risk of errors exceeding component materiality was appropriately mitigated.
Reporting threshold
We agreed with the Audit Committee that we would report to them all individual
audit differences in excess of £64,000 (2021:£60,700). We also agreed to
report differences below this threshold that, in our view, warranted reporting
on qualitative grounds.
Other information
The directors are responsible for the other information. The other information
comprises the information included in the Annual Report and Financial
Statements, other than the financial statements and our auditor's report
thereon. Our opinion on the financial statements does not cover the other
information and, except to the extent otherwise explicitly stated in our
report, we do not express any form of assurance conclusion thereon. Our
responsibility is to read the other information and, in doing so, consider
whether the other information is materially inconsistent with the financial
statements or our knowledge obtained in the course of the audit, or otherwise
appears to be materially misstated. If we identify such material
inconsistencies or apparent material misstatements, we are required to
determine whether this gives rise to a material misstatement in the financial
statements themselves. If, based on the work we have performed, we conclude
that there is a material misstatement of this other information, we are
required to report that fact.
We have nothing to report in this regard.
Independent Auditor's Report (continued)
Other Companies (Guernsey) Law, 2008 reporting
We have nothing to report in respect of the following matters where the
Companies (Guernsey) Law, 2008 requires us to report to you if, in our
opinion:
· proper accounting records have not been kept by the Company; or
· the financial statements are not in agreement with the accounting
records; or
· we have failed to obtain all the information and explanations
which, to the best of our knowledge and belief, are necessary for the purposes
of our audit.
Responsibilities of Directors
As explained more fully in the Directors' responsibilities statement within
the Directors' and Corporate Governance Report, the Directors are responsible
for the preparation of the financial statements and for being satisfied that
they give a true and fair view, and for such internal control as the Directors
determine is necessary to enable the preparation of financial statements that
are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the Directors are responsible for
assessing the Company's ability to continue as a going concern, disclosing, as
applicable, matters related to going concern and using the going concern basis
of accounting unless the Directors either intend to liquidate the Company or
to cease operations, or have no realistic alternative but to do so.
Auditor's responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial
statements as a whole are free from material misstatement, whether due to
fraud or error, and to issue an auditor's report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that
an audit conducted in accordance with ISAs (UK) will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and
are considered material if, individually or in the aggregate, they could
reasonably be expected to influence the economic decisions of users taken on
the basis of these financial statements.
Extent to which the audit was capable of detecting irregularities, including
fraud
Irregularities, including fraud, are instances of non-compliance with laws and
regulations. We design procedures in line with our responsibilities, outlined
above, to detect material misstatements in respect of irregularities,
including fraud. The extent to which our procedures are capable of detecting
irregularities, including fraud is detailed below:
Based on our understanding of the Group and the industry in which it operates,
we identified that the principal risks of non-compliance with laws and
regulations related to its investment activities, and we considered the extent
to which non-compliance might have a material effect on the Group's financial
statements.
We obtained an understanding of the legal and regulatory frameworks that are
applicable to the Company and have a direct impact on the preparation of the
financial statements. We determined that the most significant frameworks which
are directly relevant to specific assertions in the financial statements are
those that relate to the reporting framework such as IFRS and the Companies
(Guernsey) Law, 2008. We evaluated management's incentives and opportunities
for fraudulent manipulation of the financial statements (including the risk of
management override of controls), and determined that the principal risks were
related to revenue recognition in relation to the rental income from
properties held, revenue recognition in relation to loan interest from loans
advanced and management bias and judgement involved in accounting estimates,
specifically in relation to the valuation of properties and the expected
credit loss provisions (the response to which are detailed in our key audit
matters above).
We communicated relevant identified laws and regulations and potential fraud
risks to all engagement team members and the component auditor, and remained
alert to any indications of fraud or non-compliance with laws and regulations
throughout the audit.
Audit procedures performed by the engagement team to respond to the risks
identified included:
· Discussion with and enquiry of management and those charged with
governance concerning known or suspected instances of non-compliance with laws
and regulations and fraud;
· Obtaining an understanding of the internal control environment in
place to prevent and detect irregularities;
· Reading minutes of meetings of those charged with governance,
correspondence with the Guernsey Financial Services Commission, internal
compliance reports, complaint registers and breach registers to identify and
consider any known or suspected instances of non-compliance with laws and
regulations and fraud;
· Recalculating loan interest income based on the underlying loan
agreements; and
· Recalculating the rental income based on the lease agreements and
required accounting by IFRS and comparing to that of managements and
challenging differences.
Independent Auditor's Report (continued)
Our audit procedures were designed to respond to risks of material
misstatement in the financial statements, recognising that the risk of not
detecting a material misstatement due to fraud is higher than the risk of not
detecting one resulting from error, as fraud may involve deliberate
concealment by, for example, forgery, misrepresentations or through collusion.
There are inherent limitations in the audit procedures performed and the
further removed non-compliance with laws and regulations is from the events
and transactions reflected in the financial statements, the less likely we are
to become aware of it.
A further description of our responsibilities is available on the Financial
Reporting Council's website at:
https://www.frc.org.uk/auditorsresponsibilities
(https://www.frc.org.uk/auditorsresponsibilities) . This description forms
part of our auditor's report.
The engagement director on the audit resulting in this independent auditor's
opinion is Justin Hallett.
Use of our report
This report is made solely to the Company's members, as a body, in accordance
with Section 262 of the Companies (Guernsey) Law, 2008. Our audit work has
been undertaken so that we might state to the Company's members those matters
we are required to state to them in an auditor's report and for no other
purpose. To the fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the Company and the Company's members as a
body, for our audit work, for this report, or for the opinions we have formed.
.......................................................
Justin Marc Hallett FCA
For and on behalf of BDO Limited
Chartered Accountants and Recognised Auditor
Place du Pré, Rue du Pré
St Peter Port, Guernsey
Date: 9 June 2022
Consolidated statement of comprehensive income
For the year ended For the year ended
31 March 2022 31 March 2021
Notes Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
Income
Revenue 3 5,456 - 5,456 5,318 - 5,318
Change in the revaluation of investment property and assets held for sale 13 - 1,195 1,195 - 99 99
Gains/(losses) on financial assets and liabilities held at fair value through 25 601 (214) 387 72 400 472
profit or loss
Profit/(loss) on investment property disposal - - - - 110 110
Total income 6,057 981 7,038 5,390 609 5,999
Expenses
Expected credit losses 16 (1,262) (1,310) (2,572) - - -
Property operating expenses 3 (64) - (64) (86) - (86)
Investment Manager's fee 24 (2,270) - (2,270) (2,322) - (2,322)
Other administration costs 4 (962) - (962) (1,074) - (1,074)
Total operating expenses (4,558) (1,310) (5,868) (3,482) - (3,482)
Operating profit 1,499 (329) 1,170 1,908 609 2,517
Share of profit/(loss) of joint ventures and associates 12 1,215 500 1,715 446 (2,973) (2,527)
Gain on joint venture in arbitration 14 - 5,868 5,868 - 503 503
Finance income 5 4 - 4 4 - 4
Finance costs 6 (198) (52) (250) (207) (194) (401)
Profit/(loss) before taxation 2,520 5,987 8,507 2,151 (2,055) 96
Taxation 7 (82) (265) (347) (76) - (76)
Profit/(loss) for the year 2,438 5,722 8,160 2,075 (2,055) 20
Other comprehensive income/(expense) for the year
Items that may be classified to profit and loss in subsequent periods
Exchange differences arising on translation - (124) (124) - (705) (705)
of foreign operations
Other comprehensive expense for the year - (124) (124) - (705) (705)
Total comprehensive income/(expense) for the year 2,438 5,598 8,036 2,075 (2,760) (685)
Earnings per ordinary share (basic & diluted) 9 13.3p 0.0p
Adjusted earnings per ordinary share (basic & diluted) 9 4.0p 3.4p
The total column of this statement represents the Group's statement of
comprehensive income, prepared in accordance with IFRS. The revenue and
capital columns are supplied as supplementary information permitted under IFRS
(see below). All items in the above statement derive from continuing
operations.
The accompanying notes form an integral part of the financial statements.
Consolidated balance sheet
Notes 31 March 2022 31 March 2021
£'000 £'000
Non-current assets
Investment property 13 15,984 14,918
Investments held at fair value 15 - 31
Investment in joint ventures and associates 12 17,193 17,761
Loans advanced 16 13,093 5,630
46,270 38,340
Current assets
Joint venture in arbitration 14 5,868 -
Investments held at fair value 15 10,990 -
Derivatives held at fair value through profit or loss 25 88 -
Loans advanced 16 23,341 27,177
Collateral deposit 17 936 1,106
Trade and other receivables 18 13,711 36
Cash and cash equivalents 41,250 68,213
96,184 96,532
Total assets 142,454 134,872
Current liabilities
Trade and other payables 19 (971) (752)
Corporation tax 7 (12) (42)
Bank borrowings 20 (29) (29)
(1,012) (823)
Total assets less current liabilities 141,442 134,049
Non-current liabilities
Bank borrowings 20 (7,921) (7,973)
Deferred tax 7 (265) -
(8,186) (7,973)
Total liabilities (9,198) (8,796)
Net assets 133,256 126,076
Equity
Share capital 21 - -
Special reserve 22 68,243 66,655
Translation reserve 22 (801) (677)
Capital reserve 22 44,017 38,295
Revenue reserve 22 21,797 21,803
Total equity 133,256 126,076
Net asset value per ordinary share 10 216.0p 207.7p
The financial statements were approved by the Board of Directors and
authorised for issue on 9 June 2022. They were signed on its behalf by William
Simpson and Peter Griffin.
William
Simpson
Peter Griffin
Director
Director
The accompanying notes form an integral part of the financial statements.
Consolidated cash flow statement
For the year ended For the year ended
31 March 2022 31 March 2021
£'000 £'000
Operating activities
Profit for the year after taxation 8,160 20
Adjustments for:
Change in revaluation of investment property and assets held for sale (1,195) (99)
Net gains on financial assets and liabilities held at fair value through (387) (472)
profit or loss
Profit on investment property disposals - (110)
Taxation 347 76
Share of (profit)/loss of joint ventures and associates (1,715) 2,527
Gain on joint venture in arbitration (5,868) (503)
Interest receivable on loans to third parties (4,528) (4,278)
Expected credit losses 2,572 -
Finance income (4) (4)
Finance costs 250 401
Operating cash flows before movements in working capital (2,368) (2,442)
Movements in working capital:
Movement in trade and other receivables 8 410
Movement in trade and other payables 219 (539)
Cash flows used in operations (2,141) (2,571)
Loan interest received 2,717 1,646
Loans granted to third parties (24,722) (6,329)
Cash in escrow for loans to be granted post year end (13,683) -
Loans repaid by third parties 20,406 16,109
Interest received 4 4
Interest paid (183) (192)
Tax paid (113) (83)
Cash flows (used in)/from operating activities (17,715) 8,584
Investing activities
Acquisition of investments (10,998) -
Investment in joint ventures (84) (84)
Proceeds on disposal of investment property - 10,157
Dividend income from joint ventures and associates 959 408
Dividend income from investments 267 -
Capital return from joint venture in arbitration - 2,981
Capital return from joint venture 1,263 -
Collateral deposit decrease 170 260
Cash flows (used in)/from investing activities (8,423) 13,722
Financing activities
Share buyback (339) (167)
Share buyback costs (2) -
Share issue costs (63) (64)
Cash received on maturity of foreign exchange forward 72 657
Ordinary dividends paid (452) (635)
Cash flows used in financing activities (784) (209)
Net (decrease)/increase in cash and cash equivalents (26,922) 22,097
Cash and cash equivalents at beginning of year 68,213 46,068
Exchange translation movement (41) 48
Cash and cash equivalents at end of year 41,250 68,213
The accompanying notes form an integral part of the financial statements.
Consolidated statement of changes in equity
For the year Special reserve Translation reserve Capital Revenue Total equity
ended 31 March 2021 £'000 £'000 reserve reserve £'000
£'000 £'000
At 1 April 2020 65,118 28 40,350 22,131 127,627
Total comprehensive income for the year
(Loss)/profit for the year - - (2,055) 2,075 20
Other comprehensive expense for the year - (705) - - (705)
Total comprehensive (expense)/income for the year - (705) (2,055) 2,075 (685)
Transactions with owners
Cash dividends - - - (635) (635)
Scrip dividends 1,768 - - (1,768) -
Share issue costs (64) - - - (64)
Share buyback (167) - - - (167)
Total transactions with owners 1,537 - - (2,403) (866)
At 31 March 2021 66,655 (677) 38,295 21,803 126,076
Notes 21, 22
For the year Special reserve Translation reserve Capital Revenue Total equity
ended 31 March 2022 £'000 £'000 reserve reserve £'000
£'000 £'000
At 1 April 2021 66,655 (677) 38,295 21,803 126,076
Total comprehensive income for the year
Profit for the year - - 5,722 2,438 8,160
Other comprehensive expense for the year - (124) - - (124)
Total comprehensive (expense)/income for the year - (124) 5,722 2,438 8,036
Transactions with owners
Cash dividends - - - (452) (452)
Scrip dividends 1,992 - - (1,992) -
Share issue costs (63) - - - (63)
Share buyback (339) - - - (339)
Share buyback costs (2) - - - (2)
Total transactions with owners 1,588 - - (2,444) (856)
At 31 March 2022 68,243 (801) 44,017 21,797 133,256
Notes 21, 22
The accompanying notes form an integral part of the financial statements.
Notes to the financial statements for the year ended 31 March 2022
1. General information
The Company is a limited liability, closed-ended investment company
incorporated in Guernsey. The address of the registered office is given
below. The nature of the Group's operations and its principal activities are
set out in the Chairman's Statement above. The financial statements were
approved and authorised for issue on 9 June 2022 and signed by William Simpson
and Peter Griffin on behalf of the Board.
2. (a) Significant accounting policies
A summary of the principal accounting policies is set out below. The policies
have been consistently applied for all periods presented unless otherwise
stated.
The preparation of financial statements in conformity with IFRS, as adopted by
the EU, requires the use of certain critical accounting estimates. It also
requires management to exercise its judgement in the process of applying the
accounting policies. The areas involving a high degree of judgement or
complexity, or areas where the assumptions and estimates are significant to
the financial statements are disclosed in this note.
Basis of preparation
These financial statements have been prepared in accordance with IFRS, which
comprise standards and interpretations approved by the International
Accounting Standards Board ("IASB"), and International Accounting Standards
and Standards Interpretations Committee's interpretations approved by the
International Accounting Standards Committee ("IASC") that remain in effect,
and to the extent that they have been adopted by the European Union.
Russian invasion of Ukraine, Covid-19 pandemic and going concern
The Company has assessed potential impacts on the ART's portfolio arising from
the Russian invasion of Ukraine. ART has no investments in Ukraine or Russia,
nor exposure to any companies that have investments in, or links to, Ukraine
or Russia. ART has no arrangements with any person currently on (or
potentially on) any sanctions list, or links to Ukraine or Russia. The
immediate economic impact of the invasion has been a sharp increase in the
price of oil and other energy based commodities. ART has no direct exposure to
these commodities. None of the borrowers or other counterparties in ART's loan
book have links to Ukraine or Russia. It is too early to measure any impact or
increased risk to the underlying values supporting ART's loan portfolio, but
we do not expect any material change to these values on account of the
conflict. The Board will continue to monitor the situation regularly, and will
consider the wider impact on the economy (such as potential further increases
in inflation and interest rates) and if there would be any potential material
impact on ART's portfolio.
The Company has not been isolated from the ubiquitous impact of the Covid-19
pandemic on global economies in the past year. The Company's long term
strategy remains resilient. The Company adopted a prudent short term strategy
to move to cash conservation and a cautious approach to commitments to new
investments during the financial year. Alert to the impact of potentially
reducing income returns, this approach supported a robust balance sheet
position during these uncertain times. Investment in new lending and growing
the Company's diversified loan portfolio has recommenced and remains a key
focus. As noted above, the Company held approximately 40.8% of its assets
(excluding sundry net assets) in cash as at 31 March 2022 with limited current
contractual capital commitments. While there is external financing in the
Group's investment interests, this is limited and non-recourse to the Company;
the borrowings in these special purpose vehicles are compliant with their
banking covenants. While the Board's dividend policy intention is unchanged
the Company continues to actively monitor its investments and the impact of
these unusual economic circumstances on earnings and dividends. See the
investment review section for more details on the pandemic's impact on
relevant investments.
Bearing in mind the nature of the Group's business and assets, after making
enquiries, with the support of revenue forecasts for the next twelve months
and considering the above, the Directors consider that the Group has adequate
resources to continue in operational existence for the foreseeable future. For
this reason, they continue to adopt the going concern basis in preparing the
financial statements.
(a) Adoption of new and revised Standards
A few amendments and interpretations of existing standards apply to the
Group's financial year but these did not have a significant impact on the
financial statements of the Company.
(b) Standards and Interpretations in issue and not yet effective
At the date of authorisation of these financial statements, there are a number
of standards and interpretations, which have not been applied in these
financial statements that were in issue but not yet effective. The Directors
anticipate that the adoption of these standards and interpretations will not
have a material impact on the financial statements of the Group.
Basis of consolidation
(a) Subsidiaries
The consolidated financial statements incorporate the financial statements of
the Company and the subsidiary undertakings controlled by the Company, made up
to 31 March each year. Control is achieved where the Company has power over
the investee, exposure or rights, to variable returns from its involvement
with the investee and the ability to use its power to affect the amount of the
investor's returns.
The results of subsidiary undertakings acquired or disposed of during the year
are included in the consolidated statement of comprehensive income from the
effective date of acquisition or up to the effective date of disposal as
appropriate.
When necessary, adjustments are made to the financial statements of subsidiary
undertakings to bring the accounting policies used into line with those used
by the Group.
All intra-group transactions, balances, income and expenses are eliminated on
consolidation.
ART holds a number of direct property investments through subsidiary
undertakings. The Group is actively involved in the management of these
property investments and its investment plans do not include specified exit
strategies for these investments. As a result, ART plans to hold these
property investments indefinitely. ART reports its investment properties at
fair value in its financial statements but this is not the primary measurement
attribute used by management to evaluate the performance of these
investments. In addition, ART holds a number of loans through subsidiary
undertakings and management do not measure the performance of these on a fair
value basis. In consequence, management have concluded that ART does not meet
the definition of an investment entity and the subsidiaries have been
consolidated into the Group's balance sheet, rather than being carried at fair
value.
When a partial disposal of a subsidiary occurs which causes the entity to no
longer be controlled and hence no longer a subsidiary, the Company
derecognises the subsidiary and recognises the retained interest initially at
fair value.
When calculating the profit or loss on disposal the Company measures the
retained interest at fair value and includes this in the fair value of the
consideration received. The profit or loss on disposal is the difference
between the fair value of the consideration received and the carrying value of
the assets and liabilities disposed of, as reduced by transactions costs
incurred and any foreign currency gains or losses recycled on disposal as per
the foreign currency accounting policy in respect of group companies.
(b) Joint ventures and associates
The Group applies IFRS 11 to its joint arrangement. Under IFRS 11 investments
in joint arrangements are classified as either joint operations or joint
ventures depending on the contractual rights and obligations of each investor.
The Group has assessed the nature of its joint arrangements and determined
them to be joint ventures. Joint ventures are accounted for using the equity
method.
The Group also applies IAS 28: this standard defines an associate as an entity
over which an investor exercises significant influence. Under IAS 28
significant influence is the power to participate in the financial and
operating policy decisions of the investee but is not control or joint control
of those policies and, where an entity holds 20% or more of the voting power
(directly or through subsidiaries) of an investee, it is presumed that the
investor has significant influence unless it can be clearly demonstrated that
this is not the case. Associates are accounted for using the equity method.
Under the equity method of accounting, interests in joint ventures and
associates are initially recognised at cost and adjusted thereafter to
recognise the Group's share of the post-acquisition profits or losses and
movements in other comprehensive income. When the Group's share of losses in a
joint venture or associate equals or exceeds its interests in the joint
venture or associate (which includes any long-term interests that, in
substance, form part of the Group's net investment in the joint venture or
associate) the Group does not recognise further losses, unless it has incurred
obligations or made payments on behalf of the joint venture or associate.
Unrealised gains on transactions between the Group and its joint ventures or
associates are eliminated to the extent of the Group's interest in the joint
ventures or associates. Unrealised losses are also eliminated unless the
transaction provides evidence of an impairment of the asset transferred.
(c) Joint venture in arbitration
The Galaxia joint venture is classified as joint venture in arbitration and,
historically, it has been included within the financial statements based on
its estimate of realisable value to the Group: following the full recovery of
the Group's capital invested in the joint venture and the receipt, post year
end, of the full amount due under the award, allowing for provisioned residual
costs associated with the investment, the Company has increased the carrying
value of the joint venture in arbitration in its accounts as at 31 March 2022
to £5.9 million (INR 585 million) (31 March 2021: nil value).
Presentation of statement of comprehensive income
In order to better reflect the activities of an investment company and in
accordance with guidance issued by the Association of Investment Companies
("AIC"), supplementary information, which analyses the statement of
comprehensive income between items of a revenue and capital nature, has been
presented alongside the statement of comprehensive income (see above).
Revenue recognition
Rental income and service charge income from investment property leased out
under an operating lease are recognised in the statement of comprehensive
income on a straight line basis over the term of the lease. Lease incentives
granted are recognised as an integral part of the net consideration for the
use of the property and are therefore also recognised on the same straight
line basis. Rental revenues are accounted for on an accruals basis. Therefore,
deferred revenue generally represents advance payments from tenants. Revenue
is recognised when it is probable that the economic benefits associated with
the transaction will flow to the Group and the amount of revenue can be
measured reliably. Upon early termination of a lease by the lessee, the
receipt of a surrender premium, net of dilapidations and non-recoverable
outgoings relating to the lease concerned, is immediately recognised as
revenue.
Interest income is accrued on a time basis, by reference to the principal
outstanding and the effective interest rate applicable.
Other income is recognised when received.
Leasing
(a) Company as a lessor
Leases are classified as finance leases whenever the terms of the lease
transfer substantially all the risks and rewards of ownership to the lessee.
All other leases are classified as operating leases.
(b) Company as a lessee
Under IFRS 16, all leases are recorded on the balance sheet as liabilities, at
the present value of the future lease payments, along with an asset reflecting
the right to use the asset over the lease term.
The Group owns no leasehold property.
Foreign currencies
(a) Functional and presentation currency
Items included in the financial statements of each of the Group entities are
measured in the currency of the primary economic environment in which the
entity operates (the "functional currency"). The consolidated financial
statements are presented in Sterling, which is the Company's functional and
presentation currency.
(b) Transactions and balances
Transactions in currencies other than the functional currency are recorded at
the rates of exchange prevailing on the dates of the transactions. At each
balance sheet date, monetary assets and liabilities that are denominated in
foreign currencies are retranslated at the rates prevailing on the balance
sheet date. Gains and losses arising on retranslation are included in profit
or loss for the year.
(c) Group companies
The results and financial position of all the Group entities that have a
functional currency which differs from the presentation currency are
translated into the presentation currency as follows:
(i) assets and liabilities for each balance sheet
presented are translated at the closing rate at the balance sheet date;
(ii) income and expenses for each statement of
comprehensive income are translated at the average exchange rate prevailing in
the period; and
(iii) all resulting exchange differences are recognised as a
separate component of equity.
On consolidation, the exchange differences arising from the translation of the
net investment in foreign entities are taken to equity. When a foreign
operation is sold, such exchange differences are recognised in the statement
of comprehensive income as part of the gain or loss on sale.
For Euro based balances the year end exchange rate used is £1:€1.185 (2021:
£1:€1.175) and the average rate for the year used is £1:€1.176 (2021:
£1:€1.121). The year-end exchange rate used for Indian rupee (INR) balances
is £1:INR99.678 (2021: £1:INR100.855) and the average rate for the year used
is £1:INR101.813 (2021: £1:INR97.046).
Expenses
All expenses are accounted for on an accruals basis and include fees and other
expenses paid to the Administrators, the Investment Manager and the Directors.
In respect of the analysis between revenue and capital items, presented within
the statement of comprehensive income, all expenses have been presented as
revenue items except expenses which are incidental to the acquisition of an
investment property which are included within the cost of that investment
property. The Investment Manager's performance fee is charged to the capital
column in the statement of comprehensive income in order to reflect that the
fee is due primarily to the capital performance of the Group.
Taxation
The Company is exempt from Guernsey taxation on income derived outside of
Guernsey and bank interest earned in Guernsey. A fixed annual fee of £1,200
was payable to the States of Guernsey in respect of this exemption for the
year. No charge to Guernsey taxation arises on capital gains. The Group is
liable to foreign tax arising on activities in the overseas subsidiaries.
The Group has subsidiary operations in Cyprus and India. The Group also holds
investments in Spain (H2O), owned through investment entities in Luxembourg
and the Netherlands, in Germany (Hamburg), owned through a Guernsey subsidiary
and in the United Kingdom, owned directly by a UK subsidiary (Liverpool) or
through an investment entity incorporated in Jersey (Cambourne). The Group may
therefore be liable to taxation in these overseas jurisdictions.
The tax expense represents the sum of the tax currently payable and deferred
tax.
The tax currently payable is based on taxable profit for the year. Taxable
profit differs from net profit as reported in the statement of comprehensive
income because it excludes items of income and expense that are taxable or
deductible in other years and it further excludes items that are never taxable
or deductible. The Group's liability for current tax is calculated using tax
rates that have been substantively enacted at the balance sheet date.
Deferred tax is the tax expected to be payable or recoverable on differences
between the carrying amount of assets and liabilities in the financial
statements and the corresponding tax bases used in the computation of taxable
profit and is accounted for using the balance sheet liability method. Deferred
tax liabilities are generally recognised for all taxable temporary differences
and deferred tax assets are recognised to the extent that it is probable that
taxable profits will be available against which deductible timing differences
can be utilised.
The carrying amount of deferred tax assets is reviewed at each balance sheet
date and reduced to the extent that it is no longer probable that sufficient
taxable profits will be available to allow all or part of the asset to be
recovered. Deferred tax is calculated at the tax rates that are expected to
apply in the year when the liability is settled or the asset realised.
Deferred tax is charged or credited in the statement of comprehensive income,
except when it relates to items charged or credited directly to equity, in
which case the deferred tax is also dealt with in equity.
Dividends
Dividends are recognised as a liability in the Group's financial statements in
the period in which they become obligations of the Group.
Investment property
Investment property, which is property held to earn rentals and/or for capital
appreciation, is initially recognised at cost being the fair value of
consideration given including related transaction costs.
After initial recognition at cost and/or upon commencement of construction,
investment property is carried at its fair value based on half yearly
professional valuations made by independent valuers or based on Directors'
valuations. The independent valuers' valuations are in accordance with
standards complying with the Royal Institution of Chartered Surveyors
Appraisal and Valuation manual and the International Valuation Standards
Committee.
Gains or losses arising from changes in fair value of investment property are
included in the statement of comprehensive income in the period in which they
arise. Investment property is treated as acquired when the Group assumes the
significant risks and returns of ownership and as disposed of when these are
transferred to the buyer.
All costs directly associated with the purchase of an investment property and
all subsequent expenditures qualifying as acquisition costs are capitalised.
Assets held for sale
Assets are classified as held for sale if their carrying amount will be
recovered by sale rather than by continuing use in the business. For this to
be the case, the asset must be available for immediate sale in its present
condition, management must be committed to and have initiated a plan to sell
the asset which, when initiated, was expected to result in a completed sale
within twelve months. Property assets that are classified as held for sale are
measured at fair value in accordance with IAS 40 Investment Property.
Segmental reporting
Operating segments are reported in a manner consistent with the internal
reporting provided to the chief operating decision-maker. The chief operating
decision-maker, which is responsible for allocating resources and assessing
performance of the operating segments, has been identified as the Board of
Directors of the Company.
The investing policy means the Group may invest in real estate opportunities
unconstrained by geography, but with a particular focus on the UK, Europe and
Asia. At present, for management purposes, the Group is organised into one
main operating segment being Europe.
The Group's revenue generated in the UK was £4,617,000 and in Germany was
£839,000 (Year ended 31 March 2021: £4,443,000 in the UK and £875,000 in
Germany).
The Group's non-current assets are located in the following countries:
Country 2022 2021
£'000 £'000
UK 13,836 8,042
Germany 15,359 14,298
Spain 17,075 16,000
India 5,868 -
Total 52,138 38,340
Financial instruments
Financial assets and financial liabilities are recognised on the Group's
balance sheet when the Group becomes a party to the contractual provisions of
the instrument. The Group shall offset financial assets and financial
liabilities if the Group has a legally enforceable right to set off the
recognised amounts and interests and intends to settle on a net basis.
(a) Financial assets
Under IFRS 9, on initial recognition, a financial asset is classified as
measured at:
· Amortised cost;
· Fair value through other comprehensive income ("FVOCI") - debt
investment;
· FVOCI - equity investment; or
· Fair value through profit or loss ("FVTPL").
The classification of financial assets under IFRS 9 is generally based on the
business model in which a financial asset is managed and its contractual cash
flow characteristics.
The Group only has financial assets that are classified as amortised cost or
FVTPL.
(a) (i) Financial assets held at amortised cost
A financial asset is measured at amortised cost if it meets both of the
following conditions and is not designated as at FVTPL:
· it is held within a business model whose objective is to hold assets to
collect contractual cash flows; and
· its contractual terms give rise on specified dates to cash flows that are
solely payments of principal and interest on the principal amount outstanding.
Financial assets at amortised cost are initially measured at fair value plus
transaction costs that are directly attributed to its acquisition, unless it
is a trade receivable without a significant financing component which is
initially measured at its transaction price.
These assets are subsequently measured at amortised cost using the effective
interest method. The amortised cost is reduced by impairment losses as
detailed in (b) below.
Cash deposits with banks that cannot be accessed within a period of three
months are not considered to be cash and cash equivalents.
(a) (ii) FVTPL
All financial assets not classified as measured at amortised cost or FVOCI are
measured at FVTPL which includes derivative financial assets. Financial assets
at FVTPL are initially and subsequently measured at fair value.
Fair value measurement
The Group measures certain financial instruments such as derivatives and
non-financial assets such as investment property, at fair value at the end of
each reporting period, using recognised valuation techniques and following the
principles of IFRS 13. In addition, fair values of financial instruments
measured at amortised cost are disclosed in the financial statements.
Fair value is the price that would be received to sell an asset or paid to
transfer a liability in an orderly transaction between market participants at
the measurement date. The fair value measurement is based on the presumption
that the transaction to sell the asset or transfer the liability takes place
either:
· in the principal market for the asset or liability
or
· in the absence of a principal market, in the most advantageous
market for the asset or liability.
The Group must be able to access the principal or the most advantageous market
at the measurement date. The fair value of an asset or a liability is measured
using the assumptions that market participants would use when pricing the
asset or liability, assuming that market participants act in their economic
best interest.
A fair value measurement of a non-financial asset takes into account a market
participant's ability to generate economic benefits by using the asset in its
highest and best use or by selling it to another market participant that would
use the asset in its highest and best use.
The Group uses valuation techniques that are appropriate in the circumstances
and for which sufficient data are available to measure fair value, maximising
the use of relevant observable inputs and minimising the use of unobservable
inputs significant to the fair value measurement as a whole:
· Level 1 - Quoted (unadjusted) market prices in active markets for
identical assets or liabilities.
· Level 2 - Valuation techniques for which the lowest level input
that is significant to the fair value measurement is directly or indirectly
observable.
· Level 3 - Valuation techniques for which the lowest level input
that is significant to the fair value measurement is unobservable.
For assets and liabilities that are recognised in the financial statements on
a recurring basis, the Group determines whether transfers have occurred
between levels in the hierarchy by re-assessing categorisation (based on the
lowest level input that is significant to the fair value measurement as a
whole) at the end of each reporting period.
(a) (iii) Impairment of financial assets
(i) Trade receivables
Under IFRS 9 for trade receivables, including lease receivables, the Group has
elected to apply the simplified model as the trade receivables all have a
maturity of less than one year and do not contain a significant financing
component. Under the simplified approach the requirement is to always
recognise lifetime ECL. Under the simplified approach practical expedients are
available to measure lifetime ECL but forward looking information must still
be incorporated. Under the simplified approach there is no need to monitor
significant increases in credit risk and entities will be required to measure
lifetime ECLs at all times.
The directors have concluded that any ECL on trade receivables would be highly
immaterial to the financial statements due to the low credit risk of the
relevant tenants.
(ii) Other receivables
The directors have concluded that any ECL on other receivables would be highly
immaterial to the financial statements due to:
· collateral being held in the form of a security deposit for the
Group's hedging strategy which can be called back at any time with no capital
loss should the Group decide to terminate its foreign exchange contracts
before their contractual maturity;
· The credit risk of the underlying banks which are utilised by the
law firms by whom cash on escrow is kept before completion of a given senior
or mezzanine loan.
The remaining other receivables are immaterial to the financial statements and
therefore no assessment of the ECL has been completed.
(iii) Loans advanced
Despite the loans having a set repayment term, all but two of the loans have a
repayable on demand feature so the Group may call for an early repayment of
their principal, interest and applicable fees at any time.
Considering the 'on demand' clause, the Group concluded that the loans are in
stage 3 of the IFRS 9 model as should the loans be called on demand the
borrowers would technically be in default as repayment would only be possible
on demand if the property had already been sold.
The one loan that has a repayment term has an immaterial lifetime ECL and
hence no detailed analysis of whether the loan has suffered a significant
increase in credit risk has been performed.
(b) Financial liabilities
The Group classifies its financial liabilities into one of two categories,
depending on the purpose for which the liability was issued and its
characteristics. Although the Group uses derivative financial instruments in
economic hedges of currency and interest rate risk, it does not hedge account
for these transactions.
Unless otherwise indicated, the carrying amounts of the Group's financial
liabilities are a reasonable approximation of their fair values.
(b) (i) Derivatives at fair value through profit or loss
This category comprises only 'out-of-the-money' financial derivatives. They
are carried in the balance sheet at fair value with changes in fair value
recognised in the statement of comprehensive income. Other than derivative
financial instruments, the Group does not have any liabilities held for
trading nor has it designated any other financial liabilities as being at fair
value through profit or loss.
The fair value of the Group's derivatives is based on the valuations as
described in note 25.
(b) (ii) Financial liabilities measured at amortised cost
Other financial liabilities include the following items:
· Trade payables and other short-term monetary liabilities, which
are initially recognised at fair value and subsequently carried at amortised
cost using the effective interest method;
· Bank borrowings which are initially recognised at fair value net
of attributable transaction costs incurred. Such interest bearing liabilities
are subsequently measured at amortised cost using the effective interest rate
method.
(b) (iii) Derecognition of financial liabilities
A financial liability (in whole or in part) is derecognised when the Company
or Group has extinguished its contractual obligations, it expires or is
cancelled. Any gain or loss on derecognition is taken to the statement of
comprehensive income.
(c) Share capital
Financial instruments issued by the Group are treated as equity only to the
extent that they do not meet the definition of a financial liability. The
Company's ordinary shares and class A shares are classified as equity
instruments. For the purposes of the disclosures given in note 25 (capital
risk part) the Group considers all its share capital, share premium and all
other reserves as equity. The Group is not subject to any externally imposed
capital requirements.
(d) Effective interest rate method
The effective interest rate method is a method of calculating the amortised
cost of a financial asset or liability and of allocating interest income or
expense over the relevant period. The effective interest rate is the rate that
exactly discounts estimated future cash receipts or payments (including all
fees on points paid or received that form an integral part of the effective
interest rate, transaction costs and other premiums or discounts) through the
expected life of the financial asset or liability, or, where appropriate, a
shorter period.
2. (b) Significant accounting estimates and judgements
The Group makes estimates and assumptions concerning the future. The resulting
accounting estimates will, by definition, seldom equal the related actual
results. The estimates and assumptions that have a significant risk of causing
a material adjustment to the carrying amounts of assets and liabilities within
the next financial year are discussed below.
Estimates and judgements are continually evaluated and are based on historical
experience and other factors, including expectations of future events that are
believed to be reasonable under the circumstances.
(a) Investment property
The Group uses the valuations carried out by its independent valuers as the
fair value of its investment properties, whenever possible. The valuations
are based upon assumptions including future rental income, anticipated
maintenance costs, future development costs and the appropriate discount
rate. The valuers also make reference to market evidence of transaction
prices for similar properties. Investment property which is in the course of
construction is carried at cost plus associated costs and this has been
considered by the Directors to represent fair value at the balance sheet date:
upon commencement of construction, valuations will be carried out by
independent valuers.
As at the year ended 31 March 2022, the following valuations have been carried
out:
(a) (i) Independent valuations
Independent valuations were carried out for the following investment
properties:
· The directly owned properties located in Hamburg (Germany) and
Liverpool (UK) (notes 13 and 26);
· An indirectly owned property located in Madrid (Spain), held
through CBRE H2O Rivas Holding NV (note 12).
In the prior year, the valuation reports received from the independent
valuers, with the exception of the Hamburg property, included a 'Material
Valuation Uncertainty' paragraph in relation to the market risks linked to the
Covid-19 pandemic: this paragraph explained that valuers had attached less
weight to previous market evidence for comparison purposes to achieve an
informed opinion on value. Valuers therefore recommended that a higher degree
of caution should have been attached to those valuations compared to
valuations carried out under normal circumstances. This paragraph has been
removed by all valuers in their valuation reports as at 31 March 2022.
A sensitivity analysis of these investment properties' valuations is provided
in notes 12 and 26.
(b) Loans advanced - ECLs
The Group has calculated the lifetime ECLs of the loans advanced using the
following three scenarios:
1. Credit criteria unchanged or strengthened since inception and
expectation of repayment in full;
2. Credit criteria weakened since inception but expectation of full
recovery;
3. Credit criteria significantly weakened and potential for repayment
to not be fully achieved.
The criteria referred to above incorporate the following:
· Progress of development against plan;
· Borrower's financial position;
· Property market data.
In calculating the recoverable amounts under the three scenarios, the
Directors have taken into account the available collateral under the loan
agreements including charges over property and other guarantees.
Two loans in the portfolio have entered receivership: ART is closely working
with stakeholders to maximise their capital recovery. The Company has
considered the security on these loans (which are a combination of a first
charge over the assets and personal guarantees) and have calculated an
Expected Credit Loss ('ECL') on these two loans of approximately £2.2
million; the Group have also provided for an ECL on the remainder of the
loans' portfolio for an additional £0.4 million: in total, the Group have
provided for an ECL of £2.6 million in its consolidated accounts.
3. Revenue
Year ended Year ended
31 March 2022 31 March 2021
£'000 £'000
Rental income 821 986
Service charge income 52 54
Rental revenue 873 1,040
Interest receivable on loans to third parties (note 16) 4.528 4,278
Interest revenue 4,528 4,278
Other income 55 -
Other revenue 55 -
Total 5,456 5,318
At 31 March 2022, the Group recognised non recoverable property operating
expenditure as follows:
Year ended Year ended
31 March 2022 31 March 2021
£'000 £'000
Service charge income 52 54
Property operating expenditure (64) (86)
Non recoverable property operating expenditure (12) (32)
The Group recognises rental revenue from its investment in one commercial
property, a long leased industrial facility in Hamburg, Germany and a
residential property located in Liverpool, UK.
The Hamburg property is leased to Veolia Umweltservice Nord GmbH, part of the
Veolia group, an international industrial specialist in water, waste and
energy management, with a 24-year unexpired lease term. Under the operating
lease, the tenant is responsible for building maintenance and the rent has
periodic inflation linked adjustments.
The Liverpool residential property is comprised of seven units, all of which
are occupied by private individuals with a six month term contract.
At 31 March 2022, the Group had contracted with its tenants for the following
future minimum lease payments:
Year ended Year ended
31 March 2022 31 March 2021
£'000 £'000
Within one year 816 784
In the second to fifth years inclusive 3,265 3,136
After five years 12,048 12,356
Total 16,129 16,276
4. Other administration costs
Year ended Year ended
31 March 2022 31 March 2021
£'000 £'000
Auditors' remuneration for audit services 96 93
Accounting and administrative fees 400 466
Non-executive directors' fees 161 173
Other professional fees 305 342
Total 962 1,074
5. Finance income
Year ended Year ended
31 March 2022 31 March 2021
£'000 £'000
Bank interest receivable 4 4
Total 4 4
6. Finance costs
Year ended Year ended
31 March 2022 31 March 2021
£'000 £'000
Interest on bank borrowings 198 207
Foreign exchange loss 52 194
Total 250 401
The above finance costs arise on financial liabilities measured at amortised
cost using the effective interest rate method. No other losses have been
recognised in respect of financial liabilities at amortised cost other than
those disclosed above.
7. Taxation
(a) Parent Company
The Parent Company is exempt from Guernsey taxation on income derived outside
of Guernsey and bank interest earned in Guernsey. A fixed annual fee of
£1,200 (31 March 2021: £1,200) was payable to the States of Guernsey in
respect of this exemption for the year. No charge to Guernsey taxation arises
on capital gains. The Group is liable to foreign tax arising on activities in
its overseas subsidiaries. The Company has investments, subsidiaries and joint
venture operations in Luxembourg, the United Kingdom, Germany, the
Netherlands, Spain, Cyprus, Jersey and India.
(b) Group
The Group's tax expense for the year comprises:
Year ended Year ended
31 March 2022 31 March 2021
£'000 £'000
Deferred tax 265 -
Current tax 82 76
Tax Expense 347 76
The charge for the year can be reconciled to the profit per the consolidated
statement of comprehensive income as follows:
Year ended Year ended
31 March 2022 31 March 2021
£'000 £'000
Tax expense reconciliation
Profit before taxation 8,507 96
Less: income not taxable (15,343) (11,637)
Add: expenditure not deductible 8,000 11,550
Un-provided deferred tax asset movement (738) 250
Total 426 259
Year ended Year ended
31 March 2022 31 March 2021
£'000 £'000
Analysed as arising from
Cyprus entities 352 134
Dutch entity 69 121
India entity - -
Luxembourg entities - -
German investments 5 4
UK investment - -
Total 426 259
Tax at domestic rates applicable to profits in the countries concerned is as
follows:
Year ended Year ended
31 March 2022 31 March 2021
£'000 £'000
Cypriot taxation at 12.50% 44 17
Dutch taxation at 20% 14 24
India taxation at 22.66% - -
Luxembourg entities at an average rate of 29.22% * 23 34
German taxation at 15.825% 1 1
UK taxation at 20% - -
Total 82 76
*The taxation incurred in Luxembourg relates to the net wealth tax charge.
(c) Deferred taxation
The following is the deferred tax recognised by the Group and movements
thereon:
Revaluation of Investment Property Accelerated tax depreciation Tax Losses Other temporary differences Total
£'000 £'000
£'000
£'000 £'000
At 31 March 2020 - - (457) 457 -
Release to income - - 190 (190) -
At 31 March 2021 - - (267) 267 -
Release to income 265 - (69) 69 265
At 31 March 2022 265 - (336) 336 265
Certain deferred tax assets and liabilities have been offset. The following is
the analysis of the deferred tax balances (after offset) for financial
reporting purposes available for offset against future profits.
2022 2021
£'000 £'000
Deferred tax liabilities 601 267
Deferred tax assets (336) (267)
Total 265 -
At the balance sheet date the Group has unused tax losses of £0.9 million
(2021: £0.6 million). Due to the unpredictability of future taxable profits,
the Directors believe it is not prudent to recognise a deferred tax asset for
the unused tax losses at the year end.
Unused tax losses in Luxembourg, Spain, Germany and the United Kingdom can be
carried forward indefinitely. Unused tax losses in the Netherlands can be
carried forward for nine years. Unused tax losses in Cyprus can be carried
forward for five years.
A deferred tax liability has been provided for in relation to the Hamburg
investment property in Germany.
8. Dividends
Dividend reference period Shares Dividend Paid Date of payment
'000 per share £
Quarter ended 31 December 2020 10,988 1.0p 109,880 9 April 2021
Quarter ended 31 March 2021 10,922 1.0p 109,220 16 July 2021
Quarter ended 30 June 2021 12,487 1.0p 124,879 22 October 2021
Quarter ended 30 September 2021 10,764 1.0p 107,646 7 January 2022
Total 451,625
On 6 April 2022, the Company paid a dividend for the quarter ended 31 December
2021 of £125,450 (1.0p per share).
The Company will pay a dividend for the quarter ended 31 March 2022 on 20 July
2022.
In accordance with IAS 10, the dividends for quarters ended 31 December 2021
and 31 March 2022 have not been included in these financial statements as the
dividends were declared or paid after the year end. The current intention of
the Directors is to pay a dividend quarterly.
Scrip dividend alternative
In the circular published on 18 December 2018, the Company sought
shareholders' approval to enable a scrip dividend alternative to be offered to
ordinary shareholders whereby they could elect to receive additional ordinary
shares in lieu of a cash dividend, at the absolute discretion of the
Directors, from time to time. This was approved by shareholders at the
extraordinary general meeting on 8 January 2019.
The number of ordinary shares that an ordinary shareholder will receive under
the scrip dividend alternative will be calculated using the average of the
closing middle market quotations of an ordinary share for five consecutive
dealing days after the day on which the ordinary shares are first quoted "ex"
the relevant dividend.
During the year, the Board elected to offer the scrip dividend alternative to
shareholders for every quarterly dividend, which resulted in the issue of
1,191,144 new ordinary shares. These shares are rank pari passu in all
respects with the Company's existing issued ordinary shares.
The Board also elected to offer the scrip dividend alternative to shareholders
for the dividend for the quarter ended 31 December 2021: elections were
received in respect of 49,150,434 shares, which resulted in the issue of
346,379 new ordinary shares. These shares have been issued at a price of 141.9
pence each and were rank pari passu in all respects with the Company's
existing issued ordinary shares. These new shares have been admitted to
trading on the SFS of the LSE on 7 April 2022.
9. Earnings per share
The calculation of the basic and diluted earnings per share is based on the
following data:
Year Year
ended ended
31 March 31 March
2022 2021
Ordinary share Ordinary share
Earnings per statement of comprehensive income (£'000) 8,160 20
Basic and diluted earnings pence per share 13.3 0.0
Earnings per statement of comprehensive income (£'000) 8,160 20
Net change in the revaluation of investment properties and assets held for (1,195) (99)
sale
Profit on investment property disposal - (110)
Gain on joint venture in arbitration (5,868) (503)
Movement in fair value of investments 302 (108)
Movement in fair value of foreign exchange forward contract (88) (508)
Net change in the revaluation of the joint ventures' investment property (500) 2,973
Expected credit losses 1,310 -
Deferred tax 265 -
Foreign exchange loss 52 194
Adjusted earnings 2,438 2,075
Adjusted earnings (pence per share) 4.0 3.4
Weighted average number of shares ('000s) 61,311 60,290
The adjusted earnings are presented to provide what the Board believes is a
more appropriate assessment of the operational income accruing to the Group's
activities. Hence, the Group adjusts basic earnings for income and costs which
are not of a recurrent nature or which may be more of a capital nature.
10. Net asset value per share
31 March 2022 31 March 2021
Net asset value (£'000) 133,256 126,076
Net asset value per ordinary share 216.0p 207.7p
Total number of shares ('000s) 61,685 60,702
11. Investment in subsidiary undertakings
A list of the significant investments in subsidiaries as at 31 March 2022,
including the name, country of incorporation and the proportion of ownership
interest is given below.
Name of subsidiary undertaking Class of shares/units % of class held with voting rights Country of Principal
incorporation
activity
Alpha Tiger Cyprus Holdings Limited Ordinary shares 100 Cyprus Holding Company
Alpha Tiger Cyprus Investments No. 2 Limited Ordinary shares 100 Cyprus Holding Company
Alpha Tiger Cyprus Investments No. 3 Limited Ordinary shares 100 Cyprus Holding Company
Luxco 111 SARL Ordinary shares 100 Luxembourg Holding Company
Skyred International SARL Ordinary shares 100 Luxembourg Holding Company
Iron Bridge Finance Luxembourg SARL Ordinary shares 100 Luxembourg Holding Company
KMS Holding NV Ordinary shares 100 Netherlands Holding Company
ART Germany 1 Ltd Ordinary shares 100 Guernsey Property Company
Realhousingco Ltd Ordinary shares 100 United Kingdom Property Company
During the year, the Group completed the liquidation of Alpha Tiger Guernsey
Holdings No.1 Ltd, which was part of the structure that held the Unity and
Armouries property in Birmingham (UK), sold on 11 June 2020, and Alpha UK
Property Fund Asset Company ("No. 2") Limited, which sold its remaining
industrial property located in Wolverhampton (UK) on 11 September 2020.
12. Investment in joint ventures and associates
The movement in the Group's share of net assets of the joint ventures and
associates can be summarised as follows:
H2O SPHL Total H2O SPHL Total
31 March 2022 31 March 2022 31 March 2022 31 March 2021 31 March 2021 31 March 2021
£'000 £'000 £'000 £'000 £'000 £'000
As at 1 April 16,000 1,761 17,761 19,486 1,741 21,227
Additions - 84 84 - 84 84
Group's share of joint venture and associate profits before fair value 1,162 53 1,215 305 141 446
movements and dividends
Fair value adjustment for investment property 58 442 500 (2,828) (145) (2,973)
Dividends paid by joint venture and associate to the Group - (959) (959) (348) (60) (408)
Capital return - (1,263) (1,263) - - -
Foreign exchange movements (145) - (145) (615) - (615)
As at 31 March 17,075 118 17,193 16,000 1,761 17,761
The Group's investments in joint ventures and associates can be summarised as
follows:
· Joint venture investment in the H2O shopping centre in Madrid,
Spain: the Group holds a 30% equity investment in CBRE H2O Rivas Holding NV
('CBRE H2O'), a company based in the Netherlands, which in turn owns 100% of
the Spanish entities that are owners of H2O. CBRE H2O is a Euro denominated
company hence the Group translates its share of this investment at the
relevant year end exchange rate with movements in the period translated at the
average rate for the period. As at 31 March 2022, the carrying value of ART's
investment in CBRE H2O was £17.1 million (€20.2 million) (31 March 2021:
£16.0 million (€18.8 million)).
· Joint venture investment in the Phase 1000 of Cambourne Business
Park, Cambridge, UK: the Group holds a 10% equity investment in the Scholar
Property Holdings Limited ('SPHL') group, owner of the property. On 6 December
2021, SPHL disposed of its subsidiary holding the investment property and
distributed the sale proceeds to the joint venturers: ART received £1.3
million as capital return and £1.0 million as dividends. Post year end, SPHL
has commenced the process for a voluntary liquidation. As at 31 March 2022,
the carrying value of ART's investment in SPHL was £0.1 million (31 March
2021: £1.8 million).
Foreign exchange movement is recognised in other comprehensive income.
The investment in CBRE H2O is deemed to be significant and material for the
Group; its financial information can be summarised as follows:
H2O H2O
Statement of comprehensive income Year ended Year ended
31 March 2022 31 March 2021
£'000 £'000
Revenue 10,802 7,649
Change in the revaluation of investment property 193 (9,427)
Total income/(expense) 10,995 (1,778)
Operating expenses (5,036) (5,314)
Operating profit/(loss) 5,959 (7,092)
Finance costs (1,258) (1,325)
Profit/(loss) before taxation 4,701 (8,417)
Taxation (633) 5
Profit/(loss) for the period 4,068 (8,412)
Other comprehensive income/(expense) - -
Total comprehensive income/(expense) 4,068 (8,412)
H2O H2O
Balance sheet 31 March 2022 31 March 2021
£'000 £'000
Investment property 102,084 101,932
Non-current assets 102,084 101,932
Trade debtors 2,230 3,178
Other debtors 399 724
Cash 9,629 5,393
Current assets 12,258 9,295
Trade and other payables (3,955) (3,521)
Bank borrowings (119) (121)
Current liabilities (4,074) (3,642)
Bank borrowings (53,348) (54,251)
Non-current liabilities (53,348) (54,251)
Net assets 56,920 53,334
Equity 51,728 51,728
Capital and revenue reserve 5,192 1,606
Total equity 56,920 53,334
The fair value of the H2O property in Madrid (Spain) of €121.0 million
(£102.1 million) (31 March 2021: €119.8 million (£101.9 million)) has been
arrived at on the basis of an independent valuation carried out at the balance
sheet date by Savills Aguirre Newman Valoraciones y Tasaciones S.A. ("Savills
Aguirre"), an independent valuer not connected to the Group. For the year
ended 31 March 2021, the Savills Aguirre's valuations included a Material
Uncertainty clause due to significant market risks linked to the Covid-19
pandemic (see note 2(b)(a)(i) for more details): this clause has been removed
for the year ended 31 March 2022.
The valuation basis used is fair value as defined by the Royal Institution of
Chartered Surveyors Appraisal and Valuations Standards ("RICS"). The approved
RICS definition of fair value is "the price that would be received to sell an
asset, or paid to transfer a liability, in an orderly transaction between
market participants at the measurement date".
The fair value of the H2O property is based on unobservable inputs. The
following methods, assumptions and inputs were used to estimate fair value of
H2O:
31 March 2022 - H2O Shopping centre, Madrid (Spain)
Class of investment property Carrying amount / Area Valuation technique Significant unobservable inputs Weighted average/Value
fair value (square meters)
'000
Europe £102,084 51,825 Discounted cash flow Gross Estimated Rental Value ('ERV') per sqm p.a. €178.6
(€120,970)
Discount rate 8.25%
Sensitivity analysis for the 31 March 2022 valuation of the H2O shopping
centre:
31 March 2022
Significant unobservable inputs Change applied Fair value change Change applied Fair value change
€'000 €'000
ERV -10% -€8,080 +10% +€4,880
Discount rate -1% +€7,010 +1% -€9,460
31 March 2021 - H2O Shopping centre, Madrid (Spain)
Class of investment property Carrying amount / Area Valuation technique Significant unobservable inputs Weighted average/Value
fair value (square meters)
'000
Europe £101,932 51,825 Discounted cash flow Gross Estimated Rental Value ('ERV') per sqm p.a. €167.3
(€119,770)
Discount rate 8.25%
On 6 December 2021, SPHL disposed of its subsidiary holding Phase 1000 of
Cambourne Business Park, Cambridge (UK).
The CBRE H2O group bank borrowings represent the €63.7 million provided by
Aareal Bank to Alpha Tiger Spain 1, SLU less the balance of unamortised
deferred finance costs of €0.5 million. This loan carries an interest rate
of EURIBOR plus 190 basis points, matures on 18 May 2024 and is secured by a
first charge mortgage against the Spanish property. The borrowings are
non-recourse to the Group's other investments.
13. Investment property
31 March 2022 31 March 2021
£'000 £'000
Fair value of investment property at 1 April 14,918 15,389
Fair value adjustment in the year 1,195 99
Foreign exchange movement (129) (570)
Fair value of investment property at 31 March 15,984 14,918
Investment property is represented by a property located in Hamburg
(Werner-Siemens-Straße), Germany and a property located in Liverpool, UK.
The fair value of the Hamburg property of €18.2 million (£15.4 million) (31
March 2021: €16.8 million (£14.3 million)) has been arrived at on the basis
of an independent valuation carried out at the balance sheet date by Cushman
& Wakefield ('C&W') (note 26).
The fair value of the Liverpool property of £0.6 million (31 March 2021:
£0.6 million) has been arrived at on the basis of an independent valuation
carried out at the balance sheet date by ASL Chartered Surveyors ('ASL') (note
26). For the year ended 31 March 2021, the ASL's valuation included a Material
Uncertainty clause due to significant market risks linked to the Covid-19
pandemic (see note 2(b)(a)(i) for more details): this clause has been removed
for the year ended 31 March 2022.
C&W and ASL are independent valuers and are not connected to the Group.
The valuation basis used is fair value as defined by the Royal Institution of
Chartered Surveyors Appraisal and Valuations Standards ("RICS"). The approved
RICS definition of fair value is "the price that would be received to sell an
asset, or paid to transfer a liability, in an orderly transaction between
market participants at the measurement date".
Foreign exchange movement is recognised in other comprehensive income.
14. Joint venture in arbitration
31 March 2022 31 March 2021
£'000 £'000
As at 1 April - 2,510
Final proceeds receivable 5,868 -
Capital return - (2,468)
Foreign exchange movement - (42)
As at 31 March 5,868 -
In February 2022, the Supreme Court of India issued an order concluding the
litigation regarding the Company's Galaxia investment, a 50:50 joint venture
with Logix in relation to an 11.2 acre development site located in NOIDA, the
National Capital Region, India.
As part of a prior court ruling, Logix were permitted to sell the Galaxia site
to raise capital for the award. The sale completed and the funds lodged by
the purchaser with the Supreme Court have since been repatriated to ART's
investment subsidiary in return for ART's subsidiary and Logix relinquishing
their title interests.
Reflecting the receipt of funds in April 2022 and allowing for provisioned
residual costs associated with the investment, the Company has increased the
carrying value of the joint venture in arbitration in its accounts as at 31
March 2022 to £5.9 million (INR 585 million) (31 March 2021: nil value).
Foreign exchange movement is recognised in other comprehensive income.
15. Investments held at fair value
31 March 2022 31 March 2021
£'000 £'000
Non-current
As at 1 April 31 139
Movement in fair value of investments - (108)
Transfer to current (31) -
As at 31 March - 31
Current
As at 1 April - -
Additions 10,998 -
Movement in fair value of investments (39) -
Transfer from non-current 31 -
As at 30 September / 31 March 10,990 -
The investments, which are disclosed as current investments held at fair
value, are as follows:
· In June 2021, ART invested £5.0 million in the Commercial Long
Income PAIF ('CLIP') (accumulation shares): CLIP is an open ended long income
fund investing in long lease real estate; CLIP provides daily valuations of
the net asset value of its shares; the net asset value of the investment as at
31 March 2022 was £5.3 million.
· In July 2021, ART invested in three listed equity funds:
o £3.1 million in the Sequoia Economic Infrastructure Income Fund Limited
('SEQI'): the market value of SEQI as at 31 March 2022 was £2.8 million;
o £1.3 million in GCP Infrastructure Investments Limited ('GCP'): the
market value of GCP as at 31 March 2022 was £1.4 million;
o £1.6 million in GCP Asset Backed Income Fund Limited ('GABI'): the market
value of GABI as at 31 March 2022 was £1.5 million.
· Europip (participating redeemable preference shares): Europip is
currently in the process of being voluntarily wound up; ART's residual value
of the investment as at 31 March 2022 was approximately £30,000 (31 March
2021: £30,000).
· HLP (participating redeemable preference shares): HLP provides
quarterly valuations of the net asset value of its shares; the net asset value
of the investment as at 31 March 2022 was nil (31 March 2021: nil).
ARC is the Authorised Corporate Director and Alternative Investment Fund
Manager of CLIP and TIME Investments, a subsidiary of ARC, is the Investment
Manager.
16. Loans advanced
31 March 2022 31 March 2021
£'000 £'000
Non-current
Loans granted to third parties 12,882 5,630
Interest receivable from loans granted to third parties 211 -
Total loans at amortised cost 13,093 5,630
Loans at fair value through profit or loss - -
Total non-current loans 13,093 5,630
Current
Loans granted to third parties 22,945 24,415
Interest receivable from loans granted to third parties 2,473 2,295
Total loans at amortised cost 25,418 26,710
Loans at fair value through profit or loss 495 467
Expected credit losses (2,572) -
Total current loans 23,341 27,177
As at 31 March 2022, the Group had granted a total of £36.4 million (31 March
2021: £30.5 million) of senior and mezzanine loans to third parties. These
comprised twenty loans to UK entities, which assisted with the purchase of
property developments, predominantly residential, in the UK. These facilities
typically range from a 6 to 36 month term and entitle the Group to a weighted
average overall return on the investment of 17.5% for mezzanine loans and 7.7%
for senior loans.
All senior and mezzanine loans granted by the Group are secured asset backed
real estate loans. Senior loans have a first charge security and mezzanine
loans have a second charge security on the property developments.
Loans at fair value through profit or loss represents loans that failed the
'solely payment of principal and interest' criteria of IFRS 9 to be measured
at amortised cost: this is due to a loan facility agreement's clause that
links those loans to a return other than interest.
Movement in expected credit losses can be summarised as follows:
31 March 2022 31 March 2021
£'000 £'000
Opening balance of ECL - -
Movement for the year (revenue) (1,262) -
Movement for the year (capital) (1,310) -
Closing balance of ECL (2,572) -
Two loans in the portfolio have entered receivership: ART is closely working
with stakeholders to maximise their capital recovery. The Company has
considered the security on these loans (which are a combination of a first
charge over the assets and personal guarantees) and have calculated an ECL on
these two loans of approximately £2.2 million; the Group have also provided
for an ECL on the remainder of the loans' portfolio for an additional £0.4
million: in total, the Group have provided for an ECL of £2.6 million in its
consolidated accounts.
Loans maturity of the total £36.4 million loans granted by the Group at year
end, can be analysed as follows:
Less than 6 months Between 6 to 12 months Between 12 to 24 months £'m Over 24 months Total
£'m £'m £'m £'m
Non-current - - 9,882 3,211 13,093
Current 19,565 3,776 - - 23,341
Despite all of the loans having a set repayment term all but one of the loans
have a repayable on demand feature so the Group may call for an early
repayment of their principal, interest and applicable fees at any time.
Considering the 'on demand' clause, the Group concluded that the loans are in
stage 3 of the IFRS 9 model as should the loans be called on demand the
borrowers would technically be in default as repayment would only be possible
on demand if the property had already been sold. The loan without a repayable
on demand clause amounts to £3.6 million, has repayment term of 4 July 2022
and remains in stage 1 of the IFRS 9 model.
As at 31 March 2022, two loans in the portfolio have entered receivership: ART
is closely working with stakeholders to maximise their capital recovery. The
Company has considered the security on these loans (which are a combination of
a first charge over the assets and personal guarantees) and have calculated an
ECL on these two loans of approximately £2.2 million; the Group have also
provided for an ECL on the remainder of the loans' portfolio for an additional
£0.4 million: in total, the Group have provided for an ECL of £2.6 million
in its consolidated accounts.
As at 31 March 2022, ART's total undrawn loan commitments amounted to £18.6
million.
Post year end, two new loans were granted for £12.3 million, £1.8 million
was drawn from previously committed loans and loan repayments of £6.7 million
were received (including accrued interest and exit fees).
17. Collateral deposit
31 March 2022 31 March 2021
£'000 £'000
Collateral deposit 936 1,106
The collateral deposit of £0.9 million (31 March 2021: £1.1 million) is a
cash deposit with Barclays Bank PLC ('Barclays') in Guernsey in relation to
the foreign exchange forward contract entered into by the Group at year end:
this cash has been placed on deposit to match the maturity of the contract.
18. Trade and other receivables
31 March 2022 31 March 2021
£'000 £'000
Current
Trade debtors 14 5
VAT 9 14
Other debtors 13,688 17
Total 13,711 36
The balance of other debtors represents funds held in escrow for two loan
investments to be granted post year end: one of these loans completed in April
2022 for £11.8 million whilst the other loan investment for £1.9 million was
aborted so the cash was returned to the Group.
The Directors consider that the carrying amount of trade and other receivables
approximates to their fair value. See note 2(a)(a)(iii) 'financial
instruments' for more details.
19. Trade and other payables
31 March 2022 31 March 2021
£'000 £'000
Trade creditors 60 15
Deferred revenue 1 -
Investment Manager's fee payable 610 579
Accruals 277 150
Other creditors 23 8
Total 971 752
Trade creditors and accruals primarily comprise amounts outstanding for trade
purchases and ongoing costs. The Group has financial management policies in
place to ensure that all payables are paid within the credit time frame.
The Directors consider that the carrying amount of trade and other payables
approximates to their fair value.
20. Bank borrowings
31 March 2022 31 March 2021
£'000 £'000
Current liabilities: interest payable 29 29
Total current liabilities 29 29
Non-current liabilities: bank borrowings 7,921 7.973
Total liabilities 7,950 8,002
The borrowings are repayable as follows:
Interest payable 29 29
On demand or within one year - -
In the second to fifth years inclusive - -
After five years 7,921 7,973
Total 7,950 8,002
Movements in the Group's bank borrowings are analysed as follows:
31 March 2022 31 March 2021
£'000 £'000
As at 1 April 7,973 8,275
Amortisation of deferred finance costs 15 16
Foreign exchange movement (67) (318)
As at 31 March 7,921 7,973
As at 31 March 2022, bank borrowings represent the Nord LB (a German bank)
loan for €9.5 million (£8.0 million) (31 March 2021: €9.5 million (£8.1
million)), less unamortised deferred finance costs (£0.1 million): this loan
was used to partly fund the acquisition of the investment property in Hamburg
(Werner-Siemens-Straße), Germany. This loan is composed of two tranches of
€4.9 million and €4.6 million, which bear a 1.85% and 2.7% fixed rate
respectively and that are due to mature in August 2028.
The borrowings are non-recourse to ART and the facility carries no financial
covenant tests. The fair value of bank borrowings at the balance sheet date is
€9.5 million (£8.0 million).
Foreign exchange movement is recognised in other comprehensive
income/(expense).
The tables below set out an analysis of net debt and the movements in net debt
for the year ended 31 March 2022 and prior year.
Other assets Derivatives Liabilities from
financing activities
Cash Foreign exchange forward Interest payable Borrowings Total
£'000 £'000 £'000 £'000 £'000
Net asset/(debt) as at 1 April 2021 68,213 - (29) (7,973) 60,211
Cash movements (26,922) 72 183 - (26,667)
Non cash movements
Foreign exchange adjustments (41) - 15 67 41
Unrealised gain on foreign exchange forward contract - 16 - - 16
Loan fee amortisation and other costs - - - (15) (15)
Interest charge - - (198) - (198)
Net asset/(debt) as at 31 March 2022 41,250 88 (29) (7,921) 33,388
Other assets Derivatives Liabilities from
financing activities
Cash Foreign exchange forward Interest payable Borrowings Total
£'000 £'000 £'000 £'000 £'000
Net asset/(debt) as at 1 April 2020 46,068 203 (32) (8,275) 37,964
Cash movements 22,097 (54) 192 - 22,235
Non cash movements
Foreign exchange adjustments 48 - 18 318 384
Unrealised loss on foreign exchange forward contract - (149) - - (149)
Loan fee amortisation and other costs - - - (16) (16)
Interest charge - - (207) - (207)
Net asset/(debt) as at 31 March 2021 68,213 - (29) (7,973) 60,211
21. Share capital
Number of shares
Authorised
Ordinary shares of no par value Unlimited
Ordinary Ordinary Ordinary
Issued and fully paid treasury external total
At 1 April 2020 1,940,797 59,713,445 61,654,242
Share issue for scrip dividend - 1,091,765 1,091,765
Shares bought back 103,623 (103,623) -
At 1 April 2021 2,044,420 60,701,587 62,746,007
Share issue for scrip dividend - 1,191,144 1,191,144
Shares bought back 207,645 (207,645) -
At 31 March 2022 2,252,065 61,685,086 63,937,151
The Company has one class of ordinary shares. The Company has the right to
reissue or cancel the remaining treasury shares at a later date.
Under the general authority, approved by Shareholders on 6 August 2021,
Shareholders approved a resolution giving the Company a general authority to
buy back Ordinary Shares.
During the year, the Company purchased 207,645 shares in the market at the
average price of £1.64 per share: these shares are held in treasury.
As at 31 March 2022, the ordinary share capital of the Company was 63,937,151
(including 2,252,065 ordinary shares held in treasury) and the total voting
rights in the Company is 61,685,086.
Scrip dividend alternative
In the circular published on 18 December 2018, the Company sought
shareholders' approval to enable a scrip dividend alternative to be offered to
ordinary shareholders whereby they could elect to receive additional ordinary
shares in lieu of a cash dividend, at the absolute discretion of the
Directors, from time to time. This was approved by shareholders at the
extraordinary general meeting on 8 January 2019.
The number of ordinary shares that an ordinary shareholder will receive under
the scrip dividend alternative will be calculated using the average of the
closing middle market quotations of an ordinary share for five consecutive
dealing days after the day on which the ordinary shares are first quoted "ex"
the relevant dividend.
During the year, the Board elected to offer the scrip dividend alternative to
shareholders for every quarterly dividend, which resulted in the issue of
1,191,144 new ordinary shares. These shares are rank pari passu in all
respects with the Company's existing issued ordinary shares.
The Board also elected to offer the scrip dividend alternative to shareholders
for the dividend for the quarter ended 31 December 2021: elections were
received in respect of 49,150,434 shares, which resulted in the issue of
346,379 new ordinary shares. These shares have been issued at a price of 141.9
pence each and were rank pari passu in all respects with the Company's
existing issued ordinary shares. These new shares have been admitted to
trading on the SFS of the LSE on 7 April 2022.
Post year end, the Company purchased 46,500 shares in the market at the
average price of £1.51 per share: these shares are held in treasury.
As at the date of this announcement, the ordinary share capital of the Company
is 64,283,530 (including 2,298,565 ordinary shares held in treasury) and the
total voting rights in the Company are 61,984,965.
22. Reserves
The movements in the reserves for the Group are shown above.
Special reserve
The special reserve is a distributable reserve to be used for all purposes
permitted under Guernsey company law, including the buy-back of shares and
payment of dividends.
Translation reserve
The translation reserve contains exchange differences arising on consolidation
of the Group's overseas operations. These amounts may be subsequently
reclassified to profit or loss.
Capital reserve
The capital reserve contains increases and decreases in the fair value of the
Group's investment property, gains and losses on the disposal of property,
gains and losses arising from indirect property investment at fair value
together with expenses allocated to capital.
Revenue reserve
Any surplus arising from net profit after tax is taken to this reserve, which
may be utilised for the buy-back of shares and payment of dividends.
23. Events after the balance sheet date
Between April and June 2022, two new loans were granted for £12.3 million,
£1.8 million was drawn from previously committed loans and loan repayments of
£6.7 million were received (including accrued interest and exit fees).
In early April 2022, ART received the final proceeds from the joint venture in
arbitration of £5.9 million.
In April 2022, scrip dividend alternative elections were received in respect
of 49,150,434 shares of the Company, which has resulted in the issue of
346,379 new ordinary shares. Post year end, the Company purchased 46,500
shares in the market at the average price of £1.51 per share: these shares
are held in treasury.
On 6 April 2022, the Company paid a dividend for the quarter ended 31 December
2021 of £125,450 (1.0p per share).
On 1 June 2022, ART completed the acquisition of the freehold interest in a
hotel let to Travelodge Hotels Limited in Lowestoft (UK) for £3.0 million.
24. Related party transactions
Parties are considered to be related if one party has the ability to control
the other party or exercise significant influence over the other party in
making financial or operational decisions. ARC is the Investment Manager to
the Company under the terms of the Investment Manager Agreement and is thus
considered a related party of the Company. The current management agreement
with the Investment Manager will expire on 21 December 2022.
The Investment Manager is entitled to receive a fee from the Company at an
annual rate of 2 per cent of the net assets of the Company, payable quarterly
in arrears. During the year a total of £2.3 million (31 March 2021: £2.3
million), net of rebates, was billed by ARC to ART. As at 31 March 2022, a
total of £0.6 million (31 March 2021: £0.6 million) was outstanding.
The Investment Manager is also entitled to receive an annual performance fee
calculated with reference to total shareholder return ("TSR"), whereby the fee
is 20 per cent of any excess over an annualised TSR of 15 per cent subject to
a rolling 3 year high water mark. As at 31 March 2022, no performance fee was
due to ARC (31 March 2021: nil).
Prior to the 70% disposal of the H2O property, ARC had a management agreement
directly with the H2O property company, Alpha Tiger Spain 1, SLU ('ATS1')
under which it earned a fee of 0.9% per annum based upon the gross assets of
ATS1. In order to avoid double counting of fees, ARC provided a rebate to the
Company of a proportion of its fee equivalent to the value of the Group's net
asset value attributable to the H2O investment. Subsequent to the sale of ATS1
to CBRE H2O Rivas Holding NV ('CBRE H2O'), ARC has been appointed as Asset
Manager to ATS1 and Investment Manager to CBRE H2O. ARC has agreed to rebate
to ART all of the fees charged by ARC directly to CBRE H2O and ATS1 that
relate to the Company's 30% share in CBRE H2O.
The Company invests in CLIP, where ARC is the Authorised Corporate Director
and Alternative Investment Fund Manager and TIME Investments, a subsidiary of
ARC, is the Investment Manager. ARC rebates fees earned in relation to the
Company's investment in CLIP.
The Company has invested in Europip, where ARPIA, a subsidiary of ARC, is the
Investment Adviser. ARC rebates fees earned in relation to the Company's
investment in Europip.
The Company had invested in Phase 1000, Cambourne Business Park, Cambridge,
and ARC was appointed as Asset and Property Manager of the joint venture
entity. ARC rebated to ART the relevant proportion of fees earned by ARC,
which applied to the Company's investment. On 6 December 2021, SPHL disposed
of its subsidiary holding Phase 1000 of Cambourne Business Park, Cambridge
(UK).
Total rebates for the year were £0.6 million (31 March 2021: £0.6 million).
Details of the Investment Manager's fees for the year are disclosed on the
face of the consolidated statement of comprehensive income and the balance
payable at 31 March 2022 is provided in note 19.
Alpha Global Property Securities Fund Pte. Ltd, a company registered in
Singapore, owned directly by the partners of ARC, held 24,162,566 shares in
the Company at 31 March 2022 (31 March 2021: 23,593,136). ARC did not hold any
shares in the Company at 31 March 2022 (31 March 2021: nil).
The following, being partners of ARC, have interests in the following shares
of the Company at 31 March 2022:
31 March 2022 31 March 2021
Number of shares held Number of shares held
Brian Frith - 1,177,041
Phillip Rose 953,872 933,867
Brad Bauman 58,367 56,997
Post year end, Phillip Rose and Brad Bauman increased their shareholdings in
ART to 959,854 and 58,779 ordinary shares, respectively.
Details of the Directors' fees and share interests in the Company are included
in the Directors Report.
Karl Devon-Lowe, a partner of ARC, received fees of £5,000 (31 March 2021:
£5,350) in relation to directorial responsibilities on a number of the
Company's subsidiary companies.
Melanie Torode was the Operations Director, followed by Managing Director and
subsequently Non-Executive Director of Ocorian Administration (Guernsey)
Limited (formerly Estera) ('Ocorian'), the Company's administrator and
secretary, until 31 August 2021. During the year the Company paid Ocorian fees
of £96,300 (31 March 2021: £88,400) and £22,800 was outstanding at year end
(31 March 2021: nil).
25. Financial instruments risk exposure and management
There have been no substantive changes in the Group's exposure to financial
instrument risks, its objectives, policies and processes for managing those
risks or the methods used to measure them from previous periods unless
otherwise stated in this note.
Principal financial instruments
The principal financial instruments used by the Group from which financial
instrument risk arises, are as follows:
Financial assets and liabilities carrying value
31 March 2022 31 March 2021
£'000 £'000
Financial assets at fair value through profit or loss
Investments held at fair value 10,990 31
Foreign exchange forward contract 88 -
Loans advanced 495 467
Total financial assets at fair value through profit or loss 11,573 498
Financial assets at amortised cost
Loans advanced 35,939 32,340
Collateral deposit 936 1,106
Trade and other receivables 13,711 36
Cash and cash equivalents 41,250 68,213
Total loans and receivables 91,836 101,695
Total financial assets 103,409 102,193
Financial liabilities at amortised cost
Trade and other payables (971) (752)
Bank borrowings (7,950) (8,002)
Total financial liabilities (8,921) (8,754)
Net changes in realised and unrealised gains or losses on financial
instruments at fair value through profit or loss can be summarised as follows:
31 March 2022 31 March 2021
£'000 £'000
Unrealised gains and losses on financial assets and liabilities held at fair
value through profit or loss
Unrealised gain/(loss) on foreign exchange forward contract 16 (149)
Movement in fair value of investments (302) (108)
Movement in fair value of loans advanced 71 72
Undistributed investment income 263 -
Realised gains and losses on financial assets and liabilities held at fair
value through profit or loss
Realised profit on foreign exchange forward contract 72 657
Dividend received from investments held at fair value 267 -
Net gains on financial assets and liabilities held at fair value through 387 472
profit or loss
Net interest income can be summarised as follows:
31 March 2022 31 March 2021
£'000 £'000
Bank interest receivable 4 4
Interest receivable on loans granted to third parties 4,528 4,278
Expected credit losses (1,262) -
Interest on bank borrowings (198) (207)
Net interest income 3,072 4,075
General objectives, policies and processes
The Board has overall responsibility for the determination of the Group's risk
management objectives and policies and, whilst retaining ultimate
responsibility for them, it has delegated the authority for designing and
operating processes that ensure the effective implementation of the objectives
and policies to the Group's finance function.
The overall objective of the Board is to set polices that seek to reduce risk
as far as possible without unduly affecting the Group's competitiveness and
flexibility. Further details regarding these policies are set out below.
Project monitoring
Projects are monitored through regular Project Control Meetings held with
development partners to discuss progress and monitor risks. The Investment
Manager attends these meetings and reports to the Board on a quarterly basis.
Credit risk
Credit risk arises when a failure by counter parties to discharge their
obligations could reduce the amount of future cash inflows from financial
assets on hand at the balance sheet date.
At 31 March 2022, trade and other receivables past due but not impaired
amounted to nil (31 March 2021: nil).
The carrying amount of financial assets recorded in the financial statements,
which is net of impairment losses, represents the Group's maximum exposure to
credit risk.
The Group policy is to maintain its cash and cash equivalent balances with a
number of financial institutions as a means of diversifying credit risk. The
Group monitors the placement of cash balances on an ongoing basis and has
policies to limit the amount of credit exposure to any financial institution.
The Group's cash is held with established international banks such as Barclays
PLC, BGL BNP Paribas, Lloyds PLC and RBS International.
With regards to the investment property business, a property advisor monitors
the tenants in order to anticipate and minimise the impact of default by
occupational tenants. Where possible, tenants' risk is mitigated through
rental guarantees. The Group meets with tenants frequently and monitors their
financial performance closely.
The Group owns a portfolio of secured real estate loans and mezzanine loan
investments. These loans are typically secured on real estate investment and
development assets with attractive risk-adjusted income returns. The Group
receives monthly updates from its investment advisors regarding the credit
worthiness of the borrowers and values of the real estate investment and
development assets, which the loans are secured on, and assesses the
recoverability of each loan investment.
As at 31 March 2022, two loans in the portfolio have entered receivership: ART
is closely working with stakeholders to maximise their capital recovery. The
Company has considered the security on these loans (which are a combination of
a first charge over the assets and personal guarantees) and have calculated an
ECL on these two loans of approximately £2.2 million; the Group have also
provided for an ECL on the remainder of the loans' portfolio for an additional
£0.4 million: in total, the Group have provided for an ECL of £2.6 million
in its consolidated accounts.
With regards to its other investments, the Group receives regular updates from
the relevant Investment Manager as to the performance of the underlying
investments and assesses credit risk as a result.
Liquidity risk
Liquidity risk is the risk that arises when the maturity of assets and
liabilities does not match. An unmatched position potentially enhances
profitability but can also increase the risk of losses. The Group has
procedures with the object of minimising these risks such as maintaining
sufficient cash and other highly liquid current assets. Cash and cash
equivalents are placed with financial institutions on a short term basis
reflecting the Group's desire to maintain a high level of liquidity in order
to enable timely completion of investment transactions.
The following table illustrates the contractual maturity analysis of the
Group's financial liabilities.
Within 1 year 1-2 years 2-5 years Over 5 years Total Total carrying amount
£'000
£'000
31 March 2022 £'000 £'000 £'000 £'000
Trade and other payables 971 - - - 971 971
Interest payable on bank borrowings 181 181 544 243 1,149 29
Bank borrowings - - - 7,921 7.921 7,921
Total 1,152 181 544 8,164 10,041 8,921
Within 1 year 1-2 years 2-5 years Over 5 years Total Total carrying amount
£'000
£'000
31 March 2021 £'000 £'000 £'000 £'000
Trade and other payables 752 - - - 752 752
Interest payable on bank borrowings 183 183 549 428 1,343 29
Bank borrowings - - - 7,973 7,973 7,973
Total 935 183 549 8,401 10,068 8,754
Market risk
(a) Foreign exchange risk
The Group operates in India, Germany and Spain and is exposed to foreign
exchange risk arising from currency exposures with respect to Indian Rupees
and Euros. Foreign exchange risk arises from recognised monetary assets and
liabilities.
The Group's policy is, where possible, to allow Group entities to settle
liabilities denominated in their functional currency with the cash generated
from their own operations in that currency.
On 31 March 2021 the Group had entered into a seven month contract to hedge
€10.0 million of its Euro exposure in the balance sheet; this contract
terminated on 1 November 2021 and, on the same date, the Group entered into a
six month contract to hedge €11.0 million of its Euro exposure in the
balance sheet; this contract matured on 29 April 2022. At that point, the
Group entered into another six month contract to hedge €12.0 million of its
Euro exposure in the balance sheet; this contract will mature on 31 October
2022.
The Board monitors the Group's exposure to foreign currencies on a quarterly
basis as part of its Risk Management review.
Considering the year end carrying value of the joint venture in arbitration is
nil, a sensitivity analysis of the Group exposure to Indian Rupees
fluctuations is no longer relevant.
A strengthening of the Euro by 5 cents would increase the net assets by
£1,106,000 (2021: £1,013,000). A weakening of the Euro by 5 cents would
decrease net assets by £1,016,000 (2021: £931,000).
(b) Cash flow and fair value interest rate risk
The Group's interest rate risk arose primarily from bank borrowings. The Group
is not directly exposed to interest rate risk related to bank borrowings: the
bank debt of ART Germany 1 Ltd, owner of the Hamburg investment property in
Germany, bears a fixed coupon until maturity in 2028 (note 20).
The Group holds significant cash balances and loan assets which accrue
interest based on variable interest rates.
The Group's cash flow is periodically monitored by the Board.
The sensitivity analysis below is based on a change in an assumption while
holding all other assumptions constant. In practice, this is unlikely to
occur, and changes in some of the assumptions may be correlated - for example,
changes in interest rate and changes in market value.
For the Group, a decrease of 25 basis points in interest rates would result in
a £0.1 million decrease in post-tax profits (2021: £0.2 million decrease).
An increase of 25 basis points in interest rates would result in a £0.1
million increase in post-tax profits (2021: £0.2 million increase).
(c) Price risk
The Group has invested in participating redeemable preference shares in
Europip and HLP; the value of the HLP shares is assessed half yearly and is
subject to fluctuation; Europip is in liquidation and an estimated residual
amount of approximately £30,000 is receivable by the Group.
The Group has invested in accumulation shares of CLIP, which is an open ended
collective investment scheme. The value of the shares is assessed daily and is
subject to fluctuation.
The Group has invested in the ordinary shares of GCP, SEQI and GABI, which are
closed ended investment funds traded on the LSE so are subject to market
fluctuation.
The Group has performed a sensitivity analysis on the values of the
investments in CLIP, GCP, SEQI and GABI: if the share prices of these
investments were to fall by 10% the resulting total investment value of these
funds would be £9.9 million; if the share prices of these investments were to
increase by 10% the resulting total investment value of these funds would be
£12.1 million.
(d) Fair values
The following methods and assumptions were used to estimate fair values:
· Cash and short-term deposits, trade receivables, trade payables,
and other current liabilities approximate their carrying amounts due to the
short-term maturities of these instruments.
· The fair value of the foreign exchange forward contract is
determined by reference to the year end forward market rate and based on
observable inputs; this investment is therefore deemed to be a level 2
financial asset.
· The fair value of the CLIP investment, which can be traded daily
as an open ended investment fund, is based upon daily valuations, provided by
the issuer, of the net asset value of its accumulation shares.
· The fair values of the ART's investments in the SEQI, GCP and
GABI shares, which are traded daily on the LSE, are based upon the market
value of the shares at the balance sheet date.
· The fair value of the HLP investment is based upon the price
provided by the issuer for the relevant share class owned: this is calculated
by reference to the net asset value of the investment and principally driven
by the fair value of HLP's underlying property investments. This net asset
value is therefore mainly based on unobservable inputs and is deemed to be
level 3 financial assets (see note 26).
· The loans advanced at fair value have been valued based on the
discounted cash flow of the respective instruments. Due to the short time
since inception and to maturity there has not been a material movement in
discount rates or cashflows.
· The fair value of bank borrowings has been calculated based on
the discounted cash flows of the Nord LB bank loan up to maturity date in July
2028; the fair value of bank borrowings at the balance sheet date is €9.5
million (£8.0 million).
As a result the carrying values less impairment provision of loans and
receivables and financial liabilities measured at amortised cost are
approximate to their fair values.
Capital risk management
The Board's objectives when managing capital are to safeguard the Group's
ability to continue as a going concern in order to provide returns for
shareholders and benefits for other stakeholders and to maintain an optimal
capital structure to reduce the cost of capital.
In order to maintain or adjust the capital structure, the Group may adjust the
amount of dividends paid to shareholders, return capital to shareholders,
issue new shares or sell assets to reduce debt.
The Board regularly reviews the adequacy of the Group's level of borrowings by
monitoring its compliance with the relevant bank covenants.
26. Fair value measurement
IFRS 13 requires disclosure of the fair value measurement of the Group's
assets and liabilities, the related valuation techniques, the valuations'
recurrence and the inputs used to assess and develop those measurements.
The Group discloses fair value measurements by level of the following fair
value measurement hierarchy:
· Quoted prices (unadjusted) in active markets for identical assets
or liabilities (level 1).
· Inputs other than quoted prices included within level 1 that are
observable for the asset or liability, either directly (that is, as prices) or
indirectly (that is, derived from prices) (level 2).
· Inputs for the asset or liability that are not based on
observable market data (that is, unobservable inputs) (level 3).
The level in the fair value hierarchy within which the asset or liability is
categorised is determined on the basis of the lowest input that is significant
to the fair value measurement. Assets and liabilities are classified in their
entirety into one of the three levels.
Investment property is valued on a recurring basis: half yearly.
The Group's valuers derive the fair value of the investment property by
applying the methodology and valuation guidelines as set out by the Royal
Institution of Chartered Surveyors in the United Kingdom.
The valuation approach for investment property available to rent is based on
discounting the future net income receivable from properties to arrive at the
net present value of that future income stream. Future net income comprises
the rent secured under existing leases, less any known or expected
non-recoverable costs and the current market rent attributable to vacant
units. The consideration basis for this calculation excludes the effects of
any taxes on the net income. The discount factors used to calculate fair value
are consistent with those used to value similar properties, with comparable
leases in each of the respective markets. A decrease in the net rental income
or an increase in the discount rate will decrease the fair value of the
investment property.
The investments and loans advanced held at fair value and derivative contracts
are valued quarterly.
The fair value of the CLIP investment is based upon the price provided by the
issuer for the accumulation shares: this is calculated by reference to the net
asset value of the investment. This net asset value is based on observable
inputs and therefore is deemed to be a level 2 financial asset.
The fair value of the investments in the ordinary shares of GCP, SEQI and
GABI, which are traded on the LSE, is based upon the mid price of the ordinary
shares at the balance sheet date
The following table shows an analysis of the fair values of assets and
liabilities recognised in the balance sheet by level of the fair value
hierarchy described above:
Assets and liabilities measured at fair value
31 March 2022
Level 1 Level 2 Level 3 Total
£'000 £'000 £'000 £'000
Assets measured at fair value
Non-current
Investment property (note 13) - - 15,984 14,918
Loans advanced - - 495 467
Current
Investments held at fair value (note 15) 5,696 5,263 31 10,990
Foreign exchange forward contract - 88 - 88
Assets and liabilities measured at fair value
31 March 2021
Level 1 Level 2 Level 3 Total
£'000 £'000 £'000 £'000
Assets measured at fair value
Non-current
Investment property (note 13) - - 14,918 14,918
Investments held at fair value (note 15) - - 31 31
Loans advanced - - 467 467
The carrying amounts of the Group's financial liabilities and assets not
carried at fair value through profit or loss are a reasonable approximation of
their fair values due to either their short term nature or short period of
time since they were acquired.
The Group determines whether transfers have occurred between levels in the
hierarchy by re-assessing categorisation (based on the lowest level input that
is significant to the fair value measurement as a whole) at the end of each
reporting period.
Movements in level 3 of the fair value measurements, during the year ended 31
March 2022 and prior year, can be summarised as follows:
Loans advanced Investment property Investments held at fair value Total
£'000 £'000 £'000 £'000
At 1 April 2021 467 14,918 31 15,416
Additions - - 10,998 10,998
Subsequent capital expenditure after acquisition - - - -
Disposals - - - -
Redemptions - - - -
Fair value adjustment 28 1,195 (39) 1,184
Effect of foreign exchange - (129) - (129)
At 31 March 2022 495 15,984 10,990 27,469
Loans advanced Investment property and asset held for sale Investments held at fair value Total
£'000 £'000 £'000 £'000
At 1 April 2020 1,263 23,454 139 24,856
Additions - - - -
Subsequent capital expenditure after acquisition - - - -
Disposals - (8,065) - (8,065)
Redemptions (885) - - (885)
Fair value adjustment 89 99 (108) 80
Effect of foreign exchange - (570) - (570)
At 31 March 2021 467 14,918 31 15,416
There were no transfers between level 1 and level 2 fair value measurements
and no transfers into or out of level 3 fair value measurements during the
year ended 31 March 2022 and prior year.
The fair value of investment property is based on unobservable inputs and it
is therefore disclosed as level 3.
In the prior year, the valuations reports received from the independent
valuers included a 'Material Valuation Uncertainty' paragraph in relation to
the market risks linked to the Covid-19 pandemic (see note 2(b)(a)(i) for more
details). This paragraph has been removed by all valuers in their valuation
reports as at 31 March 2022.
The following methods, assumptions and inputs were used to estimate fair
values of investment property:
31 March 2022 - Hamburg (Werner-Siemens-Straße), Germany
Class of investment property Carrying amount / Area Valuation technique Significant unobservable inputs Value
fair value (acres)
'000
Europe €18,200 11.8 Discounted cash flow Gross Estimated Rental Value ('ERV') per sqm p.a. €67.4
(£15,359)
Discount rate 4.90%
Sensitivity analysis for the 31 March 2022 valuation of the Hamburg investment
property:
31 March 2022
Significant unobservable inputs Change applied Fair value change Change applied Fair value change
€'000 €'000
ERV -10% -€1,800 +10% +€1,800
Discount rate -1% +€1,500 +1% -€1,300
31 March 2021 - Hamburg (Werner-Siemens-Straße), Germany
Class of investment property Carrying amount / Area Valuation technique Significant unobservable inputs Value
fair value (acres)
'000
Europe €16,800 11.8 Discounted cash flow Gross Estimated Rental Value ('ERV') per sqm p.a. €61.2
(£14,298)
Discount rate 5.00%
31 March 2022 - Liverpool, UK
Class of investment properties Carrying amount / Area Valuation technique Significant unobservable inputs Weighted average/Value
fair value (square meters)
'000
UK £625 475 Comparable transactions analysis Comparable evidence Not applicable
31 March 2021 - Liverpool, UK
Class of investment properties Carrying amount / Area Valuation technique Significant unobservable inputs Weighted average/Value
fair value (square meters)
'000
UK £620 475 Comparable transactions analysis Comparable evidence Not applicable
No sensitivity analysis has been provided for the Liverpool property since
immaterial to the Group.
Directors and Company information
Directors
William Simpson (Chairman)
Jeff Chowdhry
Peter Griffin
Phillip Rose
Melanie Torode
Registered office
Floor 2, Trafalgar Court
Les Banques
St Peter Port
Guernsey GY1 4LY
Investment Manager
Alpha Real Capital LLP
Level 6, 338 Euston Road
London NW1 3BG
Administrator and secretary
Ocorian Administration (Guernsey) Limited
Floor 2, Trafalgar Court
Les Banques, St Peter Port
Guernsey GY1 4LY
Broker
Panmure Gordon (UK) Limited
One New Change
London EC4M 9AF
Independent valuers in the UK
GVA
3 Brindley place
Birmingham B1 2JB
Savills
Ground Floor, City Point
12 King Street
Leeds LS1 2HL
CBRE Limited
Henrietta House
Henrietta Place
London W1G 0NB
Independent valuers in Spain
Savills Aguirre Newman
Paseo de la Castellana, 81
Madrid, 28046
Spain
Independent valuers in Germany
Cushman & Wakefield
Rathenauplatz, 1
Frankfurt, 60313
Germany
Independent Auditor
BDO Limited
Place du Pré, Rue du Pré
St Peter Port
Guernsey GY1 3LL
Tax advisors in Europe
KPMG LLP
15 Canada Square
London E14 5GL
Grant Thornton UK LLP
30 Finsbury Square
London EC2A 1AG
Ernst & Young LLP
1 More London Riverside
London SE1 2AF
Legal advisors in Guernsey
Carey Olsen
PO Box 98, Carey House
Les Banques
St Peter Port
Guernsey GY1 4BZ
Legal advisors in the UK
Norton Rose
3 More London Riverside
London SE1 2AQ
Legal advisors in India
AZB & Partners
Plot A-8 Sector 4
NOIDA 201 301
India
Legal advisors in Spain
Ashurst LLP
Alcalá, 44
Madrid, 28014
Spain
Registrar
Computershare Investor Services (Jersey) Limited
Queensway House
Hilgrove Street
St Helier
Jersey JE1 1ES
Shareholder information
Further information on the Company, compliant with the SFS regulations, can be
found at the Company's website:
www.alpharealtrustlimited.com (http://www.alpharealtrustlimited.com)
Dividends
Ordinary dividends are declared and paid quarterly. Shareholders who wish to
have dividends paid directly into a bank account rather than by cheque to
their registered address can complete a mandate form for this purpose.
Mandates may be obtained from the Company's Registrar. Where dividends are
paid directly to shareholders' bank accounts, dividend vouchers are sent
directly to shareholders' registered addresses.
Shareholders who have not previously elected to receive scrip may complete a
Scrip Mandate Form, which can be obtained from the Company's Registrar.
Share price
The Company's Ordinary Shares are listed on the SFS of the LSE.
Change of address
Communications with shareholders are mailed to the addresses held on the share
register. In the event of a change of address or other amendment, please
notify the Company's Registrar under the signature of the registered holder.
Investment Manager
The Company is advised by Alpha Real Capital LLP which is authorised and
regulated by the Financial Conduct Authority in the United Kingdom.
Financial calendar
Financial reporting Reporting/ Dividend period Ex-dividend date Record date Last date for election to scrip dividend Share certificates posted Payment date
Meeting dates (if applicable) (if applicable)
Annual report published and dividend announcement 24 Quarter ended 23 24 5 19 20
June 31 March 2022 June June July July July
2022 2022 2022 2022 2022 2022
Annual General Meeting 8
September
2022
Trading update statement (Quarter 1) 16 Quarter ending 29 30 11 25 26
September 30 June 2022 September September October October October
2022 2022 2022 2022 2022 2022
Half year report 25 Quarter ending 8 9 20 5 6
November 30 September 2022 December 2022 December 2022 December 2022 January January
2022 2023 2023
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact
rns@lseg.com (mailto:rns@lseg.com)
or visit
www.rns.com (http://www.rns.com/)
.
RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our
Privacy Policy (https://www.lseg.com/privacy-and-cookie-policy)
. END FR FLMLTMTMMBJTRecent news on Alpha Real Trust
See all newsREG - Alpha Real Tst Ltd - Total Voting Rights
AnnouncementREG - Alpha Real Tst Ltd - Director/PDMR Shareholding
AnnouncementREG - Alpha Real Tst Ltd - Director/PDMR Shareholding
AnnouncementREG - Alpha Real Tst Ltd - Director/PDMR Shareholding
AnnouncementREG - Alpha Real Tst Ltd - Director/PDMR Shareholding
Announcement